Edexcel IGCSE Accounting Student's Book Answers

Answers
Chapter 1: Introduction to accounting principles

1.1
Good financial control is important to ensure the continued profitability and

success of the business. Also to control costs and cash flow.
1.2X Profit is obtained by selling goods for more than the purchase price less expenses
incurred in selling the goods.
1.3
(a) Trading and Profit and Loss Account

(b) Balance Sheet
1.4X A sole trader may incur the following drawbacks whilst trading alone:
Liable for all the debts of the business
If a loss is made he/she bears all the losses
May lack expertise in certain areas
Often has to work long hours
Positive outcomes:
Independent and responsible for all decision making
If successful and a profit is made they keep all the profits
Able to offer personal service to customers
1.5
The rules which lay down the way in which the activities of a business are
recorded and the financial statements, i.e. Trading and Profit and Loss Account
and Balance Sheet prepared.
1.6
(a) Going concern concept when a business is assumed to continue for a

long time.
(b) Accrual concept where profit is the difference between revenues and
expenses in a specific period and not the difference between cash received
and cash paid.
(c) Consistency concept applying the same method of accounting when
dealing with specific items such as depreciation and in stock valuation.
(d) Prudence concept an accountant is always very careful not to over value
specific assets such as stock or machinery etc., and to identify any potential
liabilities. It is their duty to prepare the accounts as accurately as possible to
give a fair figure of profit.
1.7X (a)
(b)
(c)
(d)
1.8
Accounting
(Any one from the above would be acceptable as an answer)
Materiality
Business entity
Money measurement
Prudence
Employees would be interested in their employers financial results for the

following reasons:
The ability to pay wages and salaries
Secure employment with the opportunity to progress within the business
Continued profitability
Sound cash flow position
Sales maintained and increasing
Business viable for the forthcoming period
Healthy customer base
(Any three of the above would be acceptable as an answer)
Pearson Education Ltd 2010
Answers
Chapter 2: Double entry for cash transactions
2.1
(a)
(b)
(c)
(d)
(e)
(f)
Purchases
Office equipment
Bank loan
Cash in hand
Motor vehicle
Loan from financial company
2.2X Wrong:
2.3
Assets
Money owing to bank
Account to be Debited
Accounting
asset
asset
liability
asset
asset
liability
Liabilities
Motor van
Stock of goods
Account to be Credited
(a) Cash
Capital
(b) Bank
Cash
(c) Purchases
Cash
(d) Ofce Machinery
Bank
(e) Stationery
Cash
2.4X Account to be debited

(a) Bank
(b) Purchases
(c) Motor car
(d) Cash
(e) Motor expenses
(f) Computer equipment
2.5
Account to be credited
Capital
Cash
Bank
Uncle Joe loan
Cash
Cash
Max Morgan
Bank Account
Jan-01
Jan-15
Capital
Sales
30,000
500
Jan-05
Jan-07
Jan-27
Jan-30
Purchases
S/H Van
Computer
Equipment
Purchases
2,770
4,800
2,100
1,090
Capital Account
Jan-01
Bank
30,000
Purchases Account
Jan-05
Jan-30
Bank
Bank
2,770
1,090
Jan-07
Bank
4,800
Van Account
Cash Account
Jan-09
Jan-29
Sales
Sales
680
325
Jan-10
Jan-22
Ofce Furniture
Motor Expenses
110
92
Sales Account
Jan-09
Jan-15
Jan-29
Cash
Bank
Cash
680
500
325
Office Furniture Account

Jan-10
Cash
110
Motor Expenses Account
Jan-22
Cash
Jan-27
Bank
92
Computer Equipment Account
2,100
2.6X
Jane Mellor
Cash Account
May 1
May 20
Capital
Sales
22,000
328
May 3
May 22
Bank
Stationery
20,000
72
Cash
22,000
Capital Account
May-01
Bank Account
May 3
May 25
Cash
Sales
20,000
560
May 7
May 10
Rent
Purchases
May 15
Display units
May 23
Purchases
May 31
S/H Van
500
1,700
400
400
3,000
May 7
Bank
May 10
May 23
Bank
Bank
Accounting
Rent Account
500
Purchases Account
1,700
400
Display Units Account
May 15
Bank
400
Sales Account
May 20
Cash
328
May 25
Bank
560
Stationery Account
May 22
Cash
72
Van Account
May 31
Bank
3,000
Answers
Chapter 3: Double entry for credit transactions
3.1
Account to be Debited
P. Hart
(b) Cash
Sales
(c) Motor Car
Morgan Motors
(d) Purchases
Cohens Ltd
(e) P. Hart
Purchase Returns
(f) H. Perkins
Sales
(g) Bank
Sales
(h) Cash
Office Furniture
3.2X Account to be debited

(a) Computer equipment
(b) Stationery
(c) Purchases
(d) Daswami & Co
(e) Purchases
(f) Sales returns
(g) Cash
(h) J. Leung
3.3
Account to be Credited
(a) Purchases
Account to be credited
J. Kershaw
Cash
J. Leung
Sales
Bank
Daswani & Co
Sales
Purchase Returns
Kendrick Products
Cash Account
Accounting
Jan-01
Capital
20,000
Jan-05
Jan-24
Bank
Stationery
18,000
45
Cash
20,000
Capital Account
Jan-01
Purchases Account
Jan-02
Jan-07
Jan-09
T. Peters
J. Leigh
Bank
2,543
349
592
Jan-18
Purchase Returns
Jan-26
Bank
2,383
Jan-05
Cash
18,000
T. Peters Account
160
Jan-02
Purchases
2,543
Purchases
T. Peters
592
2,383
Purchases
349
P. Lamond
D. Gurkan
210
1,008
Bank Account
Jan-09
Jan-26
J. Leighs Account
Jan-07
Sales Account
Jan-16
Jan-26
P. Lamond Acccount
Jan-16
Sales
210
Jan-30
Sales Returns
60
Purchase Returns Account

Jan-18
4
T. Peters
160
Stationery Account
Jan-24
Cash
45
D. Gurkan Account
Jan-26
Sales
1,008
Sales Returns Account
Jan-30
P. Lamond
60
Motor Van Account
Jan-31
Harper Motors Ltd
5,250
Harper Motors Ltd Account
Jan-31
Motor Van
5,250
Apr 14
Apr 28
Purchases
C. Chang
2,300
950
Apr 30
Ash Car Sales
5,400
3.4X Mark & Co

Bank Account
Apr 1
Capital
40,000
Capital Account
Apr 01
Bank
40,000
Purchases Account
Apr 3
Apr 5
Apr 14
E. Shah
C. Chang
Bank
Apr 20
E. Shah
845
950
2,300
920
E. Shah Account
Apr 16
Purchase returns
72
Apr 03
Purchases
845
Apr 20
Purchases
920
Purchases
950
Bank
950
Apr 05
Accounting
C. Chang Account
Apr 28
Motor Van Account

Apr 09
Ash Car Sales
Apr 30
Bank
10,400
Ash Car Sales Account
5,400
Apr 09
Motor Van
10,400
Sales Account
Apr 12
Naik Bros
147
Apr 23
Cash
369
Apr 29
Curtis & Co
420
Naik Bros Account

Apr 12
Sales
147
Purchase Returns Accounts
Apr 16
E. Shah
72
Motor Expenses
40
Cash Account
Apr 23
Sales
Apr 29
Sales
369
Apr 26
Curtis & Co Account

420
Apr 26
Cash
40
Answers
Chapter 4: Balancing of accounts and
preparation of a Trial Balance
4.1
Capital
May-01
Bank
2,500
K Gibson
D Ellis
C Mendez
Balance c/d
76
370
87
2,367
2,900
Rent
Stationery
Rent
Balance c/d
120
60
120
200
500
Balance c/d
240
Bank
May-01
May-09
May-10
Capital
C Bailey
H Spencer
2,500
250
150
May-12
May-12
May-31
May-31
2,900
Jun-01
Balance b/d
2,367
Cash
May-06
Sales
500
Jun-01
Balance b/d
200
May-08
May-19
Cash
Cash
120
120
240
Jun-01
Balance b/d
240
May-08
May-15
May-19
May-31
500
Accounting
Rent
May-31
240
Stationery
May-15
Cash
60
Purchases
May-02
May-02
May-02
May-18
May-18
D Ellis
C Mendez
K Gibson
D Ellis
C Mendez
540
87
76
145
234
1,082
Jun-01
Balance b/d
1,082
May-31
Balance c/d
1,496
May-31
Balance c/d
1,082
1,082
Sales
May-04
May-04
May-04
May-06
May-25
May-25
May-25
C Bailey
B Hughes
H Spencer
Cash
C Bailey
B Hughes
H Spencer
430
62
176
500
90
110
128
1,496
Jun-01
Balance b/d
1,496
1,496
H Spencer
May-04
May-25
Sales
Sales
176
128
304
Jun-01
Balance b/d
154
May-12
May-31
Bank
Balance c/d
370
315
685
May-10
May-31
Bank
Balance c/d
150
154
304
May-02
May-18
Purchases
Purchases
540
145
685
Jun-01
Balance b/d
315
May-02
May-18
Purchases
C Mendez
Jun-01
Balance b/d
87
234
234
234
D Ellis
C Mendez
May-31
May-31
Bank
Balance c/d
87
234
234
K Gibson
May-12
Bank
76
May-02
Purchases
76
C Bailey
May-04
May-25
Sales
Sales
430
90
520
Jun-01
Balance b/d
270
May-09
May-31
Bank
Balance c/d
250
270
520
Balance c/d
172
B Hughes
Jun-01
Sales
Sales
Balance b/d
62
110
172
May-31
172
172
Accounting
May-04
May-25
Trial Balance as at 31 May 2010

Dr
Cr
Capital
Bank
Cash
Rent
Stationery
Purchases
Sales
H Spencer
D Ellis
C Mendez
C Bailey
B Hughes
2,500
2,367
200
240
60
1,082
1,496
154
315
234
270
172
4,545
4,545
4.2X (a)
Bank Account
August 1
August 14
August 20
Capital
Sales
Sales
August 28
Sales
22,000
980
1,300
August 1
August 7
August 7
Rent
Shop fittings
Purchases
1,800
3,230
5,000
2,000
August 9
Cash
1,000
August 30
Salaries
2,100
August 30
Balance c/d
26,280
Sept 1
Balance b/d
13,150
26,280
13,150
Cash Account
August 9
Bank
1,000
Sept 1
Balance b/d
1,000
809
August 30
Balance c/d
4,280
August 9
August 16
August 30
Stationery
Sundry expenses
Balance c/d
163
28
809
1,000
August 1
August 20
August 28
Bank
Bank
Bank
980
1,300
2,000
4,280
Sept 1
Balance b/d
4,280
Balance c/d
10,700
Sales Account
4,280
Purchases Account
Accounting
August 7
August 10
August 25
September 1
Bank
Book Supplies
Delta Books
balance b/d
5,000
4,200
1,500
10,700
August 30
10,700
10,700
Shop Fittings Account
August 7
Bank
3,230
Capital Account
August 1
Bank
22,000
Rent Account
August 1
Bank
1,800
Stationery Account
August 9
Cash
August 16
Cash
April 30
Bank
163
Sundry Expenses Account
28
Salaries Account
2,100
Book Supplies Accounts
August 10
Purchases
4,200
Purchases
1,500
Delta Books Account

August 25
4.2X (b)
Jenny Moore
Trial Balance as at 31 August 2010
Dr
Cr
13,150
809
Bank
Cash
Sales
Purchases
Shop Fittings
Capital
Rent
Stationery
Sundry expenses
Salaries
Book Supplies
Delta Books
10,700
3,230
1,800
163
28
2,100
31,980
4,280
22,000
4,200
1,500
31,980
4.3
Bank
Capital
L Clark
K Allen
(1)
Balance b/d
15,000
440
76
(9)
(11)
(27)
(27)
(27)
(28)
(30)
(30)
Rent
Rates
Bowman Furnishers
Howe Homes
W Hunt
Motor Vehicles
Bates Motors
Balance c/d
15,516
500
190
532
460
2,070
3,000
5,000
3,764
Accounting
(1)
(30)
(30)
15,516
3,764
Capital
(30)
Balance c/d
15,000
(1)
Bank
15,000
(1)
Balance b/d
15,000
Howe Homes
(27)
Bank
460
(3)
Purchases
460
(3)
(20)
Purchases
Purchases
620
220
840
(1)
Balance b/d
780
Balance c/d
500
Sales returns
Bank
40
440
480
J Bond
(17)
(30)
Purchases returns
Balance c/d
60
780
840
Rent
(9)
Bank
500
(1)
Balance b/d
500
(12)
Sales
480
(30)
L Clark
480
(23)
(30)
R Gee
(12)
Sales
1,170
(1)
Balance b/d
1,170
(30)
Balance c/d
1,170
Purchses Returns
(30)
Balance c/d
88
88
(17)
(17)
Bowman Furnishers
J Bond
28
60
88
(1)
Balance b/d
88
Balance c/d
8,000
Motor Vehicles
(25)
(28)
Bates Motors
Bank
5,000
3,000
8,000
(30)
Balance b/d
8,000
(30)
8,000
Stationery
(29)
Cash
(30)
Balance b/d
56
(30)
Balance c/d
56
Balance c/d
3,930
56
Purchases
(3)
(3)
(3)
(3)
(20)
(20)
(20)
Bowman Furnishers
Howe Homes
W Hunt
J Bond
J Bond
W Hunt
Bowman
(1)
Balance b/d
(17)
(27)
Purchases returns
Bank
320
460
1,800
620
220
270
240
3,930
(30)
3,930
3,930
Accounting
Bowman Furnishers
28
532
560
(3)
(20)
Purchases
Purchases
320
240
560
Purchases
Purchases
1,800
270
2,070
(7)
(12)
(12)
(12)
(26)
Cash
L Clark
K Allen
R Gee
Cash
(1)
Balance b/d
480
480
96
1,170
175
2,401
2,401
Balance c/d
190
W Hunt
(27)
Bank
2,070
(3)
(20)
2,070
Sales
(30)
Balance c/d
2,401
2,401
Rates
10
(11)
Bank
190
(1)
Balance b/d
190
(30)
K Allen
(12)
Sales
96
(23)
(30)
Sales returns
Bank
20
76
96
Balance c/d
400
Balance c/d
60
96
Wages
(14)
Cash
400
(1)
Balance b/d
400
(23)
(23)
K Allen
L Clark
(30)
Balance b/d
(30)
Bank
5,000
(7)
(26)
Sales
Sales
480
175
(1)
Balance b/d
(30)
Sales Returns
20
40
60
(30)
60
60
Bates Motors
(25)
Motor vehicles
5,000
Cash
(14)
(29)
(30)
Wages
Stationery
Balance c/d
655
400
56
199
655
199
Trial Balance as at 30 April 2010
3,764
3,930
Bank
Purchases
Capital
J Bond
Sales
Rent
Rates
R Gee
Wages
Purchases returns
Sales returns
Motor vehicles
Stationery
Cash
Cr
Accounting
Dr
15,000
780
2,401
500
190
1,170
400
88
60
8,000
56
199
18,269
18,269
4.4
(a) Capital
credit
(b) Sales
credit
(c) Stationary
debit
(d) Cash
debit
(e) T Khan (creditor)
credit
(f) Machinery
debit
(g) Rent
debit
11
(h) D Allen (debtor)
debit
(i) Bank loan
credit
( j) Purchases
debit
4.5
Trial Balance of P Brown as at 31 May 2010

Dr
Cr
Capital
Drawings
General expenses
Sales
Purchases
Debtors
Creditors
Bank
Cash
Plant and equipment
Heating and lighting
Rent
7,000
500
29,000
6,800
15,100
200
5,000
1,500
2,400
67,500
4.6
20,000
38,500
9,000
67,500
Trial Balance of S Higton as at 30 June 2010

Dr
Cr
Accounting
Capital
Sales
Stationery
General expenses
Motor expenses
Cash at the bank
Stock 1 July 2009
Wages and salaries
Rent and rates
Office equipment
Purchases
Rent received
Debtors
Drawings
Creditors
Motor vehicle
Interest received
Insurance
12
1,200
2,745
4,476
1,950
7,668
9,492
10,500
6,000
81,753
2,208
10,353
4,200
7,500
3,444
153,489
19,956
119,439
2,139
10,230
1,725
153,489
4.7X
Trial Balance of Ms Anita Hall as at 31 December 2010

Dr
Plant and machinery
Motor vehicles
Premises
Wages
Purchases
Sales
Rent received
Telephone, printing and stationery
Creditors
Debtors
Bank overdraft
Capital
Drawings
General Expenses
Lighting and heating
Motor expenses
Motor vehicle
21,450
26,000
80,000
42,840
119,856
Cr
179,744
3,360
3,600
27,200
30,440
2,216
131,250
10,680
3,584
2,960
2,360
343,770
343,770
(b) Error of commission
(c) Error of omission
(d) Error of original entry
(e) Complete reversal of entries
(f) Error of principle
Accounting
4.8X (a) Error of principle
13
Answers
Chapter 5: Value Added Tax
5.1
(a)
C Black
Curzon Road
Stockport
To: J Booth
89 Andrew Lane
Stockport
INVOICE No 947T
Date: 1 March 2011

Your Order No. 1697
20,000 coils sealing tape x 4.70 per 1,000
94.00
40,000 sheets A5 paper x 4.50 per 1,000
180.00
30,000 sheets A4 paper x 4.20 per 1,000
126.00
400.00
70.00
470.00
VAT at 17.5%
VAT Reg No. 542 4483 95
(b)
J Booth's Books
C Black
2011
01-Mar
C Black's Books
J Booth
Accounting
14
Purchases
2011
01-Mar
Sales
470
5.2X (a) & (b) & (c)
2010
Name of Customer
Jan 2
Jan 6
Jan 7
D Woolham & Co
C Crawford
S Brocklehurst
Jan 9
Jan 13
Jan 18
Jan 21
Jan 24
Jan 29
Jan 31
L Price & Partners

D Woolham & Co
L Price & Partners
C Crawford
C Crawford
S Brocklehurst
L Price & Partners
Net
VAT
Total
230.00
348.00
1,980.00
40.25
60.90
346.50
270.25
408.90
2,326.50
520.00
56.00
200.00
340.00
44.00
846.00
722.00
5,286.00
91.00
9.80
35.00
59.50
7.70
148.05
126.35
925.05
611.00
65.80
235.00
399.50
51.70
994.05
848.35
6,211.05
470
5.3
(a) Cost of 22 reams of paper at 3.75
Input VAT is 17.5%
Customer Charged
Amount before VAT is added,
100
235 ______
117.5
Therefore, output VAT is

Amount of VAT due to HMRC, 35.00 14.44
(b) Net Amount
40.00
2.00
53.28
3.20
VAT
7.00
0.35
9.32
0.56
82.50
14.44
96.94
235.00 including VAT
200.00
17.5
82.50 ____
100
35.00
20.56
Total
47.00
2.35
62.60
3.76
5.4
(a) Ivy & Co
VAT Account
2010
Apr-30
May-31
Jun-30
Jun-30
Purchases Day Book

Purchases Day Book
Purchases Day Book
Balances c/d
8,750
7,350
9,625
2,380
28,105
Cr
2010
Apr-30
May-31
Jun-30
Sales Day Book

Sales Day Book
Sales Day Book
Jul-01
Balance b/d
9,205
8,400
10,500
28,105
2,380
Accounting
Dr
(b) The outstanding balance of 2,380 is the amount of VAT due to HMRC for the
quarter ending 30th June 2010.
When Ivy & Co pays this amount to HMRC this will clear the amount in the VAT
account.
5.5X
VAT Account
Dr
2010
Oct 31
Nov 30
Dec 31
Dec 31
Purchases Day Book

Purchases Day Book
Purchases Day Book
Balances c/d
6,580
6,895
9,100
13,300
35,875
2010
Oct 31
Nov 30
Dec 31
Cr
Sales Day Book
Sales Day Book
Sales Day Book
13,125
10,850
11,900
35,875
Jan 01
Balance b/d
13,300
(b) All business records must be kept for 6 years.
15
Answers
Chapter 6: Business documentation
6.1
(a) Remittance advice a document which accompanies payments by cheque

or via BACS and gives details of the payment made.
(b) Statement this is normally sent to purchasers at the end of each month
and it states the amount owing to the supplier at the end of that particular
month.
(c) Credit note - a document sent to a customer showing allowance given by
supplier in respect of unsatisfactory goods. Usually printed in red to
distinguish it from an invoice.
(d) Invoice a document prepared by the seller and sent to the purchaser
whenever a business buys goods or services on credit. It gives details of the
supplier and the customer, the goods purchased and their price.
6.2
(a) Purchase order

(b) Invoice
(c) Statement
(d) Remittance advice
6.3X
Statement of Account to John Ashley Ltd

Dr
Cr
Accounting
May 1
May 2
May 8
May 17
May 23
May 28
Balance b/forward
Invoice No. 7821
Invoice No. 7955
Credit Note No. 304
Invoice No. 8204
Cheque
43.75
35.00
10.20
74.50
51.50
Balance
101.50
145.25
180.25
170.05
244.55
193.05
The amount outstanding by John Ashley Ltd is 193.05

6.4X (a) Contents of an invoice - refer to text section 6.3
Contents of a credit note - refer to text section 6.4
(b) An invoice is used when a supplier has provided goods and/or services
to a customer and wishes to inform them how much is owed.
A credit note is issued by the supplier to 'credit' the buyer in respect of
unsatisfactory goods returned.
16
Answers
Chapter 7: Capital and revenue expenditure
7.1
Newton Data Systems

Type of expenditure
Reason
(a) Revenue
Use up in the short term
(b) Capital
Adds to value of computer equipment
(c) Revenue
Used up in the short term
(d) Revenue
(e) Capital
Adds to the value of the computer
(f) Question is not clear

(1) If spent on improving building
Construction Capital
(2) If spent on extra wages for
Security guards Revenue
Adds to the value of xed assets
7.2
Capital
(a)
(b)
(c)
(d)
(e)
New stationery and brochures

New pickup truck
New lathe
Delivery costs
Electricity
(f) Wages
- lathe
- wiring
- electricity costs
- Re: Improvements
- Other
18,000
5,200
200
1,800
20,000
-
Revenue
411
2,100
45,000
45,200
47,511
Accounting
Cairns Engineering Co
Brief description of capital and revenue expenditure - see text

7.3X (a) (i) Capital
(ii) Capital
(iii) Capital
(iv) Revenue
(b) (i) Expenses would be too high and net profit too low
(ii) The value of the fixed assets in the balance sheet would be too low.
17
7.4
(a) (i) Capital expenditure
(ii) Capital expenditure
(iii) Revenue expenditure
(iv) Capital receipt
(v) Revenue expenditure
(vi) Revenue receipt
(vii) Revenue expenditure
(b) It is important to distinguish between capital and revenue expenditure

because incorrect treatment of expenditure would result in profits being
affected and the balance sheet position becoming distorted.
If capital expenditure is incorrectly treated as revenue expenditure then

the net profit will be understated and the assets in the balance sheet
undervalued. If revenue expenditure is incorrectly treated as capital
expenditure then the net profit would be overstated and the balance sheet
position would be overvalued.
7.5X Capital (a), (c), (f)
Accounting
18
Revenue (b), (d), (e), (g)
Answers
Chapter 8: Books of original entry and ledgers Sales day
book and sales ledger including VAT
8.1
(a)
(b)
(c)
(d)
(e)
(f)
Sales day book / sales ledger / personal account

Cash book / general ledger / nominal account
Purchases day book / purchases ledger / personal account
Cash book / general ledger / nominal account
Sales returns day book / sales ledger / personal account
Purchases returns day book / purchases ledger / personal account
8.2X (a) (i) Purchase day book: purchase invoices

(ii) Sales returns day book: sales credit notes
(iii) Cash book: cheques received, cheques paid out, cash receipts and cash
payments
(iv) Sales day book: sales invoices
(v) Purchase returns day book: purchase credit notes
(b) Personal accounts: contain the accounts of businesses and people i.e. debtors
and creditors.
Impersonal accounts: contain the other accounts, divided between real and
nominal accounts.
Real accounts: are accounts in which fixed assets and stock are recorded, such
as machinery, property, fixtures and fittings.
8.3
Date
2010
Nov-02
Nov-03
Nov-09
Nov-11
Nov-13
Nov-18
Nov-23
Nov-30
Details
T Bates
D Cope
F Chan
T Bates
B Ho
D Cope
M Saka & Sons
F Chan
Sales Day Book

Folio
Goods
186.00
166.00
12.00
54.00
66.00
32.00
20.00
320.00
856.00
VAT
32.55
29.05
2.10
9.45
11.55
5.60
3.50
56.00
149.80
Accounting
Nominal accounts: record expenses, income and capital.
Total
218.55
195.05
14.10
63.45
77.55
37.60
23.50
376.00
1005.80
19
Sales Ledger
Cr
T Bates Account
Dr
Nov-02
Nov-11
Dr
Nov-03
Nov-18
Dr
Nov-09
Nov-30
Dr
Nov-13
Dr
Nov-23
Sales
Sales
218.55
63.45
D Cope Account
195.05
37.60
F Chan Account
14.10
376.00
B Mo Account
77.55
M Saka & Sons Account
23.50
Sales
Sales
Sales
Sales
Sales
Sales
Cr
Cr
Cr
Cr
General Ledger
Dr
Dr
8.4X
Accounting
Date
2011
Jul 1
Jul 5
Jul 8
Jul 14
Jul 19
Jul 26
Jul 28
Jul 31
Details
Sales Account
Nov-30
Credit sales for the month
Cr
856.00
VAT Account
Nov-30
Sales day book: VAT
149.80
Cr
Sales Day Book

Folio
Goods
Hall Products
Ash & Co
K. Meakin
A. Ballearic
Hall Products
G. Huang
A. Ballearic
J. Stead
520.00
62.00
18.00
110.00
880.00
126.00
42.00
98.00
1,856.00
VAT
91.00
10.85
3.15
19.25
154.00
22.05
7.35
17.15
324.80
Total
611.00
72.85
21.15
129.25
1,034.00
148.05
49.35
115.15
2,180.80
Sales Ledger
Hall Products Account
Dr
Jul 1
Jul 19
Dr
Jul 5
Dr
Jul 8
Dr
Jul 14
Jul 28
20
Sales
Sales
Sales
Sales
Sales
Sales
611.00
1,034.00
Ash & Co Account
72.85
K. Meakin Account
21.15
A. Ballearic Account
129.25
49.35
Cr
Cr
Cr
Cr
Dr
Jul 26
Dr
Jul 31
Sales
Sales
G. Huang Account
148.05
J Stead Account
115.15
Cr
Cr
General Ledger
Dr
Sales Account
Jul 31 Credit sales for the month
Dr
VAT Account
Jul 31 Sales day book : VAT
Cr
324.80
It is important to check sales invoices prior to sending them out to customers for
the following reasons:
To ensure the customers order number or reference is shown.
To check that the correct quantity of goods has been invoiced.
To ensure the goods/services are invoiced at the right place.
To check all the calculations and extensions.
Accounting
8.5
Cr
1,856.00
21
Answers
Chapter 9: Purchases day book and
purchase ledger including VAT
9.1
White Bros
Purchases Day Book
Date
2010
May-01
May-07
May-16
May-23
May-26
May-28
May-31
Details
Bould & Co
Harlow & Brown
J Adams Ltd
Bould & Co
J H Products
Harlow & Brown
P Yeung Ltd
Goods
104.00
48.00
234.00
170.00
320.00
62.00
446.00
VAT
18.20
8.40
40.95
29.75
56.00
10.85
78.05
Total
122.20
56.40
274.95
199.75
376.00
72.85
524.05
1384.00
242.20
1626.20
Purchase Ledger
Dr
Bould & Co Account

May-01
May-23
Dr
Purchases
Purchases
Harlow and Brown Account

May-07
May-28
Accounting
Cr
Dr
Cr
Purchases
Purchases
56.40
72.85
Purchases
274.95
J Adam Ltd Account

May-16
Dr
Cr
J H Products Account
May-26
Dr
Cr
Purchases
376.00
Purchases
524.05
P Yeung Account
May-31
122.20
199.75
Cr
General Ledger
Dr
May-31
Purchases Account
Credit purchases
for the month
Dr
May-31
22
1384.00
VAT Account
Purchases Day
Book : VAT
Cr
242.20
Cr
9.2
Bakers Electrical Co
Purchases Day Book
Date
2010
Jul-03
Jul-08
Jul-12
Jul-17
Jul-21
Jul-23
Jul-25
Jul-30
Details
Peak Electrical
Leigh Electrics
Thomas Motors
Naik & Sons
Peak Electrical
W D Services
Leighs Electrics
Naik & Sons
Goods
722.00
84.00
274.00
160.00
158.00
46.00
210.00
178.00
VAT
126.35
14.70
47.95
28.00
27.65
8.05
36.75
31.15
Total
848.35
98.70
321.95
188.00
185.65
54.05
246.75
209.15
1832.00
320.60
2152.60
Purchases Ledger
Peak Electrical Ltd Account
Jul-03
Jul-21
Dr
Cr
Purchases
Purchases
Leigh Electrics Account

Jul-08
Jul-25
Dr
Cr
Purchases
Purchases
98.70
246.75
Purchases
321.95
Thomas Motors Account

Jul-12
Dr
Cr
Naik & Sons Account

Jul-17
Jul-30
Dr
Cr
Purchases
Purchases
188.00
209.15
Purchases
54.05
W D Services Account
Jul-23
848.35
185.65
Accounting
Dr
Cr
General Ledger
Dr
Jul-31
Purchases Account
Credit purchases
for the month
Dr
Jul-31
1832.00
VAT Account
Purchases Day
Book : VAT
Cr
Cr
320.60
23
9.3X Tasty Foods

Purchases Day Book
Date
2010
Aug 1
Aug 6
Aug 10
Aug 14
Aug 22
Aug 27
Aug 29
Aug 30
Details
Goods
62.00
48.00
224.00
136.00
98.00
166.00
84.00
366.00
1,184.00
Barker Foods Ltd

Fern Bros
Ash Catering Co
Barker Foods Ltd
Farm Produce
Fern Bros
Leigh & Sons
Ash Catering Co
VAT
10.85
8.40
39.20
23.80
17.15
29.05
14.70
64.05
207.20
Total
72.85
56.40
263.20
159.80
115.15
195.05
98.70
430.05
1,391.20
Purchases Ledger
Dr
Barker Foods Ltd Account

Aug 1
Aug 14
Dr
Purchases
Purchases
72.85
159.80
Purchases
Purchases
56.40
195.05
Fern Bros Account

Aug 6
Aug 27
Dr
Cr
Ash Catering Co Account
Cr
Aug 10
Purchases
263.20
Aug 30
Purchases
430.05
Dr
Farm Products Account
Dr
Leigh & Sons Account
Aug 22
Accounting
Cr
Aug 29
Cr
Purchases
Cr
Purchases
98.70
General Ledger
Dr
Aug 31
Purchases Account
Credit purchases
for the month
Dr
Aug 31
VAT Account
Purchases Day
Book : VAT
Cr
1,184.00
207.20
9.4X It is important to check invoices prior to payment to ensure:

The goods invoices match the order specification
The goods have been received
They have been charged correctly
The calculations are accurate
The invoice has been passed for payment
24
115.15
Cr
Answers
Chapter 10: Sales returns day book and purchase
returns day book
10.1
Sales Day Book
Date
2010
Jun-01
Jun-01
Jun-09
Jun-09
Jun-23
Jun-30
Goods
180.00
60.00
140.00
330.00
780.00
440.00
1930.00
Details
J Alcock
P Twigg
Bell Products
Travis Ltd
B Seddon
P Twigg
(Page 7)
VAT
31.50
10.50
24.50
57.75
136.50
77.00
337.75
Total
211.50
70.50
164.50
387.75
916.50
517.00
2267.75
VAT
2.10
8.75
10.85
Total
14.10
58.75
72.85
Sales Returns Day Book

Date
2010
Jun-12
Jun-28
Details
Goods
12.00
50.00
62.00
J Alcock
Travis Ltd
Dr
Jun-01
J Alcock Account
Sales
Dr
Jun-01
Jun-30
Sales
70.50
517.00
Cr
164.50
387.75
Jun-28
Cr
Sales returns
B Seddon Account
Sales
14.10
Cr
Travis Ltd Account

Sales
Dr
Jun-23
Sales returns
Bell Products Account
Dr
Jun-09
Jun-12
Cr
P Twigg Account
Sales
Sales
Dr
Jun-09
211.50
Accounting
Sales Ledger
58.75
Cr
916.50
General Ledger
Dr
Sales Account
Jun-30
Dr
Jun-30

Total SRDB
Dr
Jun-30
Cr
Total SDB
Cr
62.00
VAT Account
Total SRDB
1930.00
10.85
Jun-30
Cr
Total SDB
337.75
25
10.2
Purchases Day Book
Date
2010
May-01
May-05
May-05
May-14
May-19
May-19
May-19
May-31
May-31
Details
Goods
120.00
80.00
220.00
60.00
300.00
280.00
80.00
56.00
172.00
1368.00
J Yau Ltd
S Wager
Ash Bros
J Yau Ltd
D Wong
Rughani & Co
Ash Bros
A Davies
Rughani & Co
VAT
21.00
14.00
38.50
10.50
52.50
49.00
14.00
9.80
30.10
239.40
Total
141.00
94.00
258.50
70.50
352.50
329.00
94.00
65.80
202.10
1607.40
VAT
5.25
7.35
12.60
Total
35.25
49.35
84.60
Purchase Returns Day Book

Date
2010
May-09
May-27
Details
Goods
30.00
42.00
72.00
J Yau Ltd
D Wong
Purchase Ledger
Dr
Accounting
May-09
J Yau Ltd Account

Purchase returns
Dr
35.25
May-01
May-14
Purchases
Purchases
S Wager Account
May-05
Dr
Dr
Purchases
94.00
Purchases
Purchases
258.50
94.00
Cr
D Wong Account
Purchase returns
Dr
49.35
May-19
Cr
Purchases
352.50
Purchases
Purchases
329.00
202.10
Purchases
65.80
Rughani & Co Account

May-19
May-31
Dr
Cr
A Davies Account
May-31
141.00
70.50
Cr
Ash Bros. Account

May-05
May-19
May-27
Cr
Cr
General Ledger
Dr
May-31
Purchases Account
Total PDB
Dr
Purchase Returns Account

May-31
Dr
May-31
26
Cr
1368.00
Cr
Total PRDB
72.00
Total PRDB
12.60
VAT Account
Total PDB
239.40
May-31
Cr
10.3X Anderson's Ltd (b)

Purchases Day Book
Date
2010
Jan 2
Jan 5
Jan 19
Details
Naylor's Ltd
Roberts & Sons
R. James & Co
Goods
VAT
Total
1,300.00
668.00
1,512.00
3,480.00
227.50
116.90
264.60
609.00
1,527.50
784.90
1,776.60
4,089.00
Purchase Returns Day Book

Date
2010
Jan 13
Jan 30
Details
Goods
VAT
Total
Naylor's Ltd
R. James & Co
84.00
400.00
484.00
14.70
70.00
84.70
98.70
470.00
568.70
Sales Day Book

Date
2010
Jan 12
Jan 26
Jan 26
Jan 28
Jan 28
Details
Goods
VAT
Total
Marlow (Fancy
Gifts)
J. Jeynes
Birch Bros
F & J Shah
Marlow (Fancy
Gifts)
656.00
114.80
770.80
2,468.00
340.00
5,000.00
380.00
431.90
59.50
875.00
66.50
2,899.90
399.50
5,875.00
446.50
8,844.00
1,547.70
10,391.70
Goods
VAT
Total
60.00
10.50
70.50
60.00
10.50
70.50
Details
Marlow (Fancy
Gifts)
Jan 30
Accounting
Sales Returns Day Book

Date
2010
10.3X (a) (c) (e)

Sales Ledger
J. Jeynes Account
Jan-01
Jan-26
Feb-01
Balance b/d
Sales
Balance b/d
1,490.00
2,899.90
4,389.90
Jan-31
Balance c/d
4,389.90
4,389.90
4,389.90
Marlow (Fancy Goods) Account
Jan-01
Jan-12
Jan-28
Balance b/d
Sales
Sales
552.00
770.80
446.50
1,769.30
Feb-01
Balance b/d
1,698.80
Jan-01
Jan-28
Balance b/d
Sales
780.00
5,875.00
6,655.00
Feb-01
Balance b/d
6,655.00
Jan-26
Sales
Jan-30
Jan-31
Sales Returns
Balance c/d
70.50
1,698.80
1,769.30
F & J Shah Account

Jan-31
Balance c/d
6,655.00
6,655.00
Birch Bros Ltd Account

399.50
27
10.3X (a) (c) (e)

Purchase Ledger
R. James & Co. Account
Jan-30
Jan-31
Purchase Returns
Balance c/d
470.00
2,906.60
3,376.60
Jan-01
Jan-19
Balance b/d
Purchases
1,600.00
1,776.60
3,376.60
Feb-01
Balance b/d
2,906.60
Jan-01
Jan-02
Balance b/d
Purchases
900.00
1,527.50
2,427.50
Feb-01
Balance b/d
2,328.80
Jan-01
Jan-05
Balance b/d
Purchases
490.00
784.90
1,274.90
Feb-01
Balance b/d
1,274.90
Naylor's Ltd Account

Jan-13
Jan-31
Purchase Returns
Balance c/d
98.70
2,328.80
2,427.50
Roberts & Sons Account

Jan-31
Balance c/d
1,274.90
1,274.90
10.3X (d)
General Ledger
Dr
Cr
Sales Account
Jan-31
Dr
Total Sales for

January
Cr
Jan-31
Total SRDB
Jan-31
Total Purchases
for January
60.00
Accounting
Purchases Account
3,480.00
Purchases Return Account
Jan-31
Dr
Jan-31
Jan-31
Jan-31
Total PRDB
484.00
Jan-31
Jan-31
Total PRDB
Total SDB
84.70
1,547.70
*Feb-01
Balance b/d
1,632.40
1,012.90
Cr
VAT Account
Total PDB
Total SRDB
Balance c/d
609.00
10.50
1,012.90
1,632.40
* The balance on the VAT account shows that Anderson's Ltd owe 1,012.90 to HMRC
10.4

28
8,844.00
Perris Design Company

Reconciliation of ledger accounts with supplier's statements
(a) Bennetts Ltd as at 31 July 2010
Balance per our Purchase Ledger

760.28
Add Purchases not received by us
121.50
Add Returns not received by supplier
63.50
Balance per Supplier's Statement
945.28

(b) Kirkhams Products Ltd as at 31 July 2010
Balance per our Purchase Ledger
Add Purchases not received by us

Add Returns not received by supplier
Balance per Supplier's Statement
1,387.68
68.42
54.62
1,510.72
Answers
Chapter 11: Cash books
11.1
Cash Book
Cash
(1)
(4)
(6)
(8)
(10)
(14)
(15)
(30)
(31)
(1)
Capital
Sales
T Thomas
Sales
J King
J Walters
(Loan)
Bank
J Scott
Sales
Balances b/d
Bank
4,000
Cash
(2)
(4)
(12)
(15)
(20)
Fixtures
Rent
Wages
Cash
Stationery
500
(22)
J French
277
(28)
(31)
Drawings
Balances c/d
225
188
308
300
200
66
791
5,273
216
4,247
Bank
660
140
275
200
60
166
100
216
4,247
791
5,273
11.2X
Cash Book
2010
Cash
Bank
76.32
Cr
2010
Cash
Bank
Feb 1
Balance b/d
2,376.50
Feb 2
Electricity
Feb 6
D Hill
300.00
Feb 4
Motor
expenses
15.00
156.00
Feb 6
A Jackson
275.00
Feb 7
Stationery
3.70
Feb 6
H Wardle
93.20
Feb 12
Palmer & Sons

- purchases
723.50
Feb 10
Sales
Feb 14
500.00
Feb 16
217.00
53.00
Feb 17
Feb 17
Wright
Brothers
Drawings
Post office re:
86.20
Feb 22
Feb 26
D Whitman loan
J Smith
Sales
Feb 28
Balance c/d
590.60
Accounting
Dr
57.10
50.00
Telephone a/c
140.60
Mr S Jepson
133.42
Mar-01
Balances b/d
43.72
Feb 23
Petrol
Feb 27
Brownsons of
M/cr
Feb 28
Salaries
Feb 28
Balance c/d
4,405.30
21.00
899.00
2,400.00
43.72
133.42
Mar-01
Balances b/d
4,405.30
590.60
29
11.3
Cash Book
Disct
(1)
(3)
(5)
(9)
Capital
Sales
N Morgan
S Cooper
(14)
(20)
(31)
L Curtis
P Exeter
Sales
Cash
Bank
6,000
407
10
20
210
380
2
32
407
115
78
88
6,871
Disct
(1)
(2)
(4)
(7)
(12)
(16)
(31)
Fixtures
Purchases
Rent
S Thompson
& Co
Rates
M Monroe
Calances c/d
Cash
Bank
950
1,240
200
4
76
410
6
10
114
93
407
4,195
6,871
General Ledger
Discounts Allowed
(31)
Cash Book
32
Discounts Received
(31)
Cash Book
10
11.4X
M Pinero
Cash Book
Dr
Accounting
Disct
(1)
(2)
Balance b/d
Capital
(4)
(5)
(8)
(15)
(18)
Sales
Cash
Sales
Bank
L Graham
(18)
(18)
(22)
(28)
(30)
B Crenshaw
H Green
T Weiskopf
Cash
Balance c/d
Cash
58
Bank
1,000
220
200
500
400
4
76
7
11
133
209
204
755
6,049
22
1,382
Disct
(1)
(3)
(5)
(6)
(6)
(6)
(12)
(15)
(16)
(20)
(26)
(28)
(31)
(31)
8,422
Dr
Cash Book
Discounts Allowed Account

Cash Book
22
Cash
Bank
1,470
780
200
2
6
10
78
234
390
77
400
120
210
150
755
4,920
18
(31)
30
Balance b/d
Office
fixtures
Bank
B Barnes
T Horton
T Jackin
Motor
Expenses
Cash
Drawings
Wages
Insurance
Bank
Motor Van
Balance c/d
General Ledger
Discounts Received Account
Dr
(31)
Cr
20
1,382
8,422
Cr
18
Cr
Answers
Chapter 12: Petty cash and the imprest system
12.1
Date
Details
2.00
Total
Jun 01
Jun 01
Jun 01
Jun 03
Jun 04
Jun 06
Jun 10
Jun 14
Jun 16
Jun 19
Jun 21
Jun 23
Jun 27
Jun 29
Balance b/d
Cash
Window cleaner
Postage stamps
Petrol
Stationery
Jean Ford stamps
Office cleaner
Parcel postage
Magazine
Computer disks
Petrol
Refreshments
Office cleaner
10.00
7.60
37.60
9.75
32
33
34
35
8
36
37
38
39
40
41
42
20.00
1.35
3.00
7.95
14.10
4.20
20.00
135.55
Jun 30
Balance c/d
Jul 01
Balance b/d
Jul 01
Cash
152.00
16.45
133.55
VAT
Postage
Cleaning
Number
2010
18.52
131.48
Voucher
Motor
Expenses
p
Stationery
Sundry
Expenses
p
10.00
7.60
5.60
1.45
32.00
8.30
20.00
1.35
3.00
1.05
2.10
6.90
12.00
4.20
20.00
10.20
8.95
50.00
44.00
15.20
7.20
16.45
152.00
Amount required to restore imprest = Float required
Accounting
Receipts
150.00
Less Cash in hand 16.45

Amount required 133.55
31
Singh's Estate Agents - Petty Cash book
12.2X
Receipts
Date
Voucher
Details
Total
VAT
Postage
Cleaning
11.66
7.40
8.60
20.00
4.23
1.66
23.40
76.60
3.50
2010
15 Oct
15 Oct
16 Oct
17 Oct
18 Oct
20 Oct
20 Oct
23 Oct
23 Oct
25 Oct
27 Oct
28 Oct
Balance
Cash
Envelopes and files
Tea, Coffee and milk
Special delivery
Office cleaner
Cleaning materials
M Lloyd Stationery
Postage stamps
Travel expenses
Flowers
Photocopy paper
80
81
82
83
84
78
85
86
87
88
31 Oct Balance
c/d
01 Nov Balance
b/d
Accounting
7.00
4.43
Less Cash in hand
13.80
Amount required
86.20
20.00
3.60
0.63
89.70
13.80
103.50
10.00
7.40
0.74
1.40
01 Nov Cash
Sundry
Expenses
8.60
7.00
16.42
4.99
9.40
Amount required to restore the imprest = Float required 100.00
32
Stationery
b/d
103.50
13.80
86.20
Travel
Expenses
16.42
4.25
8.00
15.60
23.60
16.42
18.00
11.65
Answers
Chapter 13: Bank reconciliation statements
Note: Both in theory and in practice you can start with the cash book balance working
to the bank statement balance, or you can reverse this method. Many teachers and
lecturers have their preferences, but this is a personal matter only. Examiners sometimes
ask for them using one way, sometimes the other. Students should therefore be able to
tackle them both ways.
13.1
(a)
Cash Book
2010
Dec-31
(Totals so far)
J Walters
2,328
54
2010
Dec-31
Dec-31
(Totals so far)
Bank charges
Balance c/d
2,382
497
22
1,863
2,382
(b)
Bank Reconciliation Statement as at 31 December 2010
Balance per cash book
Add Unpresented cheque
Less Bankings not yet on bank statement (249 1 178)
1,863
115
1,978
427
Balance per bank statement
1,551
Accounting
OR
Add Bankings not yer on bank statement (249 1 178)
Less Unpresented cheque
1,551
427
1,978
115
1,863
13.2X
(a)
Preston & Co
Cash Book
Dr
Dec 31
Dec 31
Balance b/d
BGC: P Todd
9,155
270
9,425
Jan 1
Balance b/d
Dec 31
Dec 31
Cr
Bank charges
Balance c/d
110
9,315
9,425
9,315
33
(b)
Preston & Co
9,315
575
Balance as per cash book

9,890
Less Bankings not yet on bank statement ( 945 1 300 1 890)
2,135
7,755
OR
Preston & Co
7,755
2,135
Balance as per bank statement

Add Bankings not yet on bank statement ( 945 1 300 1 890)
9,890
575
9,315
13.3
(a)
Cash Book - James Baxter
Accounting
2010
Mar-31
Mar-31
BGC - A May
Balance c/d
929
2,003
2010
Mar-31
Mar-31
Mar-31
2,804
100
Balance b/d
Standing order
- Oak plc
Bank charges
28
2,932
2,932
(b)
James Baxter
Bank Reconciliation Statement as at 31 March 2010
2,003
160
Bank overdraft per cash book

Add Banking not entered on bank statement
2,163
490
Bank overdraft per bank statement
1,673
OR
James Baxter
Bank Reconciliation Statement as at 31 March 2010
34

Less Banking not entered on bank statement
1,673
160
1,513
490
O/D

2,003
O/D
O/D
13.4X
(a)
E Flynn
Cash Book
2010
Dec-06
Dec-20
Dec-31
Dec-31
Dec-31
J Hallworth
C Walters
P Miller
K Saunders
Balance c/d
155
189
211
180
4,007
2010
Dec-01
Dec-10
Dec-19
Dec-29
Dec-30
Dec-31
Balance b/d
P Wood
M Roberts
P Phillips
s/o Mercantile
Bank charges
3,872
206
315
84
200
65
4,742
4,742
(b)
E Flynn
Bank overdraft per cash book
Add Bank lodgements not yet entered on bank statement
4,007
211
4,218
84
Bank overdraft per bank statement
4,134
13.5
(a)A cheque that the bank refuses to pay due to insufficent funds in the debtor's
account.
Apr-01
Apr-07
Apr-13
Apr-20
Apr-30
Apr-22
Narrative
Balance b/d
Sales banked
Sales banked
Sales banked
Sales banked
CT - M Bell
8,000
800
550
650
750
1,230
Date
Apr-02
Apr-08
Apr-15
Apr-15
Apr-20
Apr-28
Apr-30
Apr-30
Narrative
F Bashir (10123)
M Tyler (10124)
H Joshi (10125)
DD / MTC
DD / Pre. Ins
Bank charges
Dishonoured cheque
Balance c/d
11,980
May-01
Balance b/d
1,200
1,300
1,250
250
80
120
280
7,500
Accounting
(b) Date
11,980
7,500
(c)
Real Kitchen Suppliers
Bank Reconciliation Statement as at 30 April 2010
Balance as per cash book
Add: Unpresented cheque - 10125
7,500
1,250
Less: cash not yet credited
8,750
750
8,000
35
Answers
Chapter 14: The journal
14.1
The Journal
Date
2010
Jan-01
Jan-05
Jan-08
Jan-15
Jan-29
Details
Dr
4,000
Computer Equipment
Data Systems Ltd
Drawings
Purchases
Bad debts
J Oddy
Motor vehicle
Bank
Cr
4,000
120
120
220
220
15,500
15,500
Office furniture and fittings
250
J Street
250
Accounting
14.2X
(a) Fixtures
(b) Drawings
Dr
Dr
1,809
500
(c) Drawings
Dr
(d) Office
equipment
Purchases
Cr
Cr
1,809
500
100
Cash
Cr
100
Dr
500
K Lamb
Cr
500
(e) J Harper
Dr
65
Fixtures
Cr
65
(f)
Dr
68
J Brown
Cr
68
Dr
2,190
Super Offices
Cr
2,190
(a) J Harkness
(b) Machinery
Dr
Dr
678
4,390
J Harker
L Pearson
Cr
Cr
678
4,390
(c) Motor Van
Dr
10,800
Motor expenses
Cr
10,800
Bad debts
(g) Office
equipment
J Harper
14.3
(d) E Fletcher
Dr
(e) Sales
Dr
257
Dr
Dr
699
189
Sales
Cr
Commissions
received
Cr
257
K Webb
Bank
Cr
Cr
699
189
14.4X
(a) H Weld
(b) Cash
(c) B Maxim
Dr
443
(d) K Innes
Dr
10
(e) H Mersey*
Dr
178
B Gunn
Cr
443
Purchases
Cr
10
Cash
Cr
178
*Needs double the amount to first cancel out the error and then replace it with the
correct amount.
36
14.5X
(a)
Journal
Sep 30
Sep 30
Dr
750
Drawings
Purchases
Bring correction of error of omission
L Patel
A Patek
Cr
750
500
500
Being correction of your error of commission
(b)
Dr
Sep 30
Sep 30
Suspense Account
Balance b/d
Farmer & Co
340
170
510
Sep 30
Sep 30
Cr
Sales
Pointer Bros
240
270
510
(c) Before discovery of the errors in the Trial Balance the debit side was deficient
by 340.
Accounting
(d) The trial balance has its limitations since certain errors can occur and not be
revealed, such as: Error of omission
Error of commission
Error of principle
Error of original entry
Compensating errors
Complete reversal of entries
One from the above list.
37
Answers
Chapter 15: Sales ledger and purchase ledger
control accounts
15.1
Dr
Sales Ledger Control Account
2010
Oct-01
Oct-31
Balance b/d
SDB
Nov-01
Balance b/d
12,340
124,790
2010
Oct-31
Oct-31
Oct-31
Oct-31
SRDB
Bank & cash
Discount allowed
Balance c/d
137,130
Cr
2,847
116,225
3,638
14,420
137,130
14,420
15.2X
Dr
2010
Feb 1
Feb 28
Feb 28

Balance b/d
SDB
Bank : dishonoured
cheques
33,950
347,480
791
2010
Feb 28
Feb 28
Feb 28
Feb 28
Feb 28
Accounting
Feb 28
Bad Debts
Purchase ledger
set offs
Balance c/d
382,221
Mar 1
Balance b/d
332,920
4,497
11,095
977
1,400
31,332
382,221
31,332
15.3
Dr
2010
Jul-31
Jul-31
Jul-31
Jul-31
Purchase Ledger Control Account

PRDB
Bank
Discount received
Balance c/d
1,575
26,150
550
19,375
47,650
2010
Jul-01
Jul-31
Balance b/d
PDB
Cr
19,450
28,200
47,650
Aug-01
38
Bank & cash

Discount allowed
SRDB
Cr
Balance b/d
19,375
15.4X
Dr
2010
Jan 31
Jan 31
Jan 31
Jan 31
Jan 31
Purchase Ledger Control Account

PRDB
Bank
Discount received
Sales ledger set offs
Balance c/d
2,835
45,070
990
2,000
34,875
85,770
2010
Jan 31
Jan 31
Balance b/d
PDB
Cr
35,010
50,760
85,770
Feb 1
Balance b/d
34,875
15.5X
(a)
Dr
2009
Jan 1
Dec 31
Dec 31

Balance b/d
SDB
Returned cheque
65,000
453,900
750
2009
Dec 31
Dec 31
Dec 31
Dec 31
Dec 31
Dec 31
519,650
Cr
RIDB
Bank
Discount All
Bad Debts
Purchase ledger
set offs
Balance c/d
6,430
432,000
7,540
650
1,650
71,380
519,650
Accounting
(b) Ravi believes there may be errors in his sales ledger because the sales ledger shows
78.540 total debtors at the end of December 2009. Having constructed the control
account the total debtors outstanding amounts to 71,380. Therefore there is a
discrepancy of 78,540 71,380 7,160 which will require investigation.
(c) The closing balance of the sales ledger control account would appear under current
assets in the balance sheet.
39
Answers
Chapter 16: Trading account and profit and
loss account of a sole trader
16.1
Lucy Chan
Trading and Profit and Loss Account for the year ending 31 December 2010
Sales
Less cost of goods sold
Purchases
Less closing stock
Gross Profit
Less Expenses
Rent
Wages and salaries
Printing and stationery
Electricity expenses
General expenses
84,665
15,085
4,595
28,865
2,940
2,485
1,295
Net Profit
16.2X
Accounting
40,180
Charles Drew
Trading and Profit and Loss Account for the year ending 31 December 2010
Sales
Purchases
Less closing stock
Gross Profit
Less Expenses
Wages
Rent
Office expenses
Motor expenses
Net Profit
69,580
64,190
24,010
40
133,770
96,547
18,495
11,229
5,330
1,620
922
1,350
128,452
78,052
50,400
20,451
29,949
G Singh
Trading and Profit and Loss Account for the year ended 31 December 2010
Sales
Less Cost of goods sold:
Purchases
Less Closing stock
Gross Profit
Less Expenses
Wages
Motor expenses
Rates
Insurance
General expenses
58,516
10,192
14,224
11,300
R Cairns
Trading and Profit and Loss Account for the year ended 30 June 2010
Sales
Less Cost of goods sold
Purchases
Less closing stock
Gross Profit
Less Expenses
Wages
Rates
Printing and Stationery
Electricity
Insurance
Sundry Expenses
Motor expenses
71,409
11,498
9,492
2,000
562
1,266
605
1,518
3,109
Net Profit
16.5X
48,324
25,524
8,600
2,080
2,680
444
420
Net Profit
16.4X
73,848
99,082
59,911
39,171
Accounting
16.3
18,552
20,619
J Leung
Trading and Profit and Loss Account for the year ended 31 March 2010
Sales
Purchases
Less closing stock
Gross Profit
Less Expenses
Rent and rates
Insurance
Motor expenses
Salaries and wages
General expenses
Net Profit
133,171
42,828
6,708
1,312
2,219
2,429
26,855
3,466
153,080
90,343
62,737
42,989
19,748
41
Answers
Chapter 17: The Balance Sheet
17.1
G Singh
Balance Sheet as at 31 December 2010
Fixed Assets
Buildings
Motor vehicle
Current Assets
Stock
Debtors
Cash at bank
Cash in hand
Less Current Liabilities
Creditors
20,000
12,000
20,000
12,000
32,000
32,000
10,192
7,800
6,616
160
24,768
6,418
6,418
Net current assets
18,350
50,350
Financed by
Cash introduced
48,000
11,300
Add Net profit for the year
59,300
8,950
Less Drawings
50,350
Accounting
17.2X
R Cairns
Balance Sheet as at 30 June 2010
Fixed assets
Premises
Computer equipment
Motor vehicle
Current assets
Stock
Debtors
Cash at bank
Cash in hand
Less Current liabilities
Creditors
Net current assets
Financed by:
Capital introduced
Add Net profit for the year
Less Drawings
145,000
8,000
145,000
8,000
16,500
16,500
169,500
169,500
11,498
9,498
6,541
-
27,537
3,618
3,618
23,919
193,419
185,000
20,619
205,619
12,200
193,419
42
17.3
J Leung
Balance Sheet as at 31 March 2010
Fixed Assets
Buildings
Equipment
Motor van
120,400
17,028
15,050
120,400
17,028
15,050
152,478
152,478
Current Assets
Stock
Debtors
Cash at bank
42,828
29,283
4,876
76,987

Creditors
13,975
13,975
Working Capital
63,012
215,490
Financed by
Capital
Net profit
212,736
19,748
232,484
16,994
Less Drawings
215,490
17.4X
Sarah Joshi
Trading and Prot and Loss Account for the
year ended 31 May 2010
Net Profit
85,691
14,998
3,000
822
3,473
605
12,465
1,319
578
103,658
Accounting
Sales
Purchases
Less closing stock
Gross Profit
Less Expenses
Rent
General expenses
Motor expenses
Wages and salaries
Insurance
70,693
32,965
22,262
10,703
43
Balance Sheet as at 31 May 2010

Fixed Assets
Buildings
Computer equipment
Motor vehicle
Current Assets
Stock
Debtors
Cash at bank
Creditors
Net current assets / working capital
Less Long-term liabilities
Financed By:
Capital
Add Net profit
Less Drawings
180,000
3,600
180,000
3,600
19,800
19,800
203,400
203,400
14,998
11,398
13,850
40,246
4,343
4,343
35,903
239,303
237,240
10,703
247,943
8,640
Accounting
239,303
44
Answers
Chapter 18: Financial statements:
other considerations
18.1
K Jepson
Trading account for the year ended 31-Dec-10
Sales
Opening stock
Add purchases
Add carriage inwards
12,463
47,536
1,206
Less closing stock
61,205
13,480
Gross profit
47,725
22,011
Jane Li
Sales
Less Cost of Goods Sold
Opening Stock
Add Purchases
Add Carriage Inwards
29,686
66,429
2,020
Less Closing Stock
98,135
33,307
Gross profit
98,280
Accounting
18.2X
69,736
64,828
33,452
45
18.3
J Mann
Trading and Profit and Loss Account for the year ended 31 July 2010
Sales
Less sales returns
Opening stock
Add Purchases
Less purchase returns
Less Closing stock
Gross Profit
Less Expenses
Salaries and wages
Rent
Motor Expenses
General expenses
Carriage outwards
11,949
65,100
3,570
80,619
1,176
79,443
8,883
10,521
3,066
6,552
882
1,659
Emily Hart
Accounting
Less Cost of Goods Sold

Opening Stock
Add Purchases
Add Carriage Inwards
Less Purchase Returns
Less Closing Stock
Gross Profit
Less Expenses
Wages
Rent and rates
General expenses
Carriage outwards
Net Profit
22,680
16,590
Sales
Less sales returns
46
70,560
39,270
Net Profit
18.4X
110,859
1,029
109,830
34,732
122,683
400
157,815
3,000
154,815
32,984
189,050
2,850
186,200
121,831
64,369
21,875
2,800
684
931
525
26,815
37,554
S Shah
Trading and Profit and Loss Account for the year ended 30 June 2010
178,560
1,968
176,592
Sales
Less sales returns
Opening stock
Add Purchases
22,733
113,990
2,976
139,699
3,091
136,608
28,320
Less purchase returns

Less Closing stock
Gross Profit
Less Expenses
Salaries and wages
Rent and rates
Insurance
Motor Expenses
Telephone and internet
Electricity
Carriage outwards
General expenses
108,288
68,304
37,075
2,918
749
4,250
4,198
1,594
1,920
3,014
55,718
Net Profit
12,586
Fixed Assets
Buildings
Computer equipment
Motor vehicles
Current Assets
Stock
Debtors
Cash at bank
Creditors
Net Current Assets (Working Capital)
Less long-term liabilities
Long-term loans
Financed by
Capital account
Balance b/f
Add net profit for the year
Less Drawings
80,000
3,360
17,280
100,640
Accounting
18.5
80,000
3,360
17,280
100,640
28,320
37,402
4,627
70,349
32,618
32,618
37,731
138,371
Nil
138,371
137,305
12,586
149,891
11,520
138,371
47
18.6X
J Collins
Sales
Less Cost of sales
Opening stock
Add Purchases
Carriage inwards
15,104
46,224
936
62,264
19,992
Less Closing stock

Gross Profit
Less Expenses
Salaries and wages
Carriage outwards
Rent
Rates
Travel expenses
Telephone
Sundry expenses
11,788
1,304
1,824
1,080
810
490
756
2,808
Net Profit
74,400
42,272
32,128
20,860
11,268
Balance Sheet as at 31 March 2010
Fixed Assets
Fixtures and fittings
Computer equipment
Accounting
Current Assets
Stock
Debtors
Cash at bank
Cash in hand
Creditors
Net Current assets
Financed by:
Capital
Add net profit
48
Less Drawings
2,400
9,600
12,000
2,400
9,600
12,000
19,992
18,308
15,504
480
54,284
12,180
12,180
42,104
54,104
51,376
11,268
62,644
8,540
54,104
Answers
Chapter 19: The concept of depreciation
of xed assets
19.1
J Chen
(a) Straight Line
(b) Reducing Balance
Cost
Year 1
Depreciation*
6,000
6,000
1,250
Year 1
Depreciation 40% 3
6,000
3,600
4,750
Year 2
Depreciation
1,250
Year 2
Depreciation 40% 3
3,600
3,500
Year 3
Depreciation
1,250
Depreciation
1,250
1,440
2,160
Year 3
Depreciation 40% 3
2,160
2,250
Year 4
2,400
864
1,296
Year 4
Depreciation 40% 3
1,296
1,000
519
777
6,000 2 1, 000
Accounting
*Depreciation 5 _____________
5 1,250
4
19.2
Machine
(a) Straight Line
Cost
Year 1
Depreciation*
75,000
75,000
11,070
Year 1
Depreciation 20% 3
75,000
63,930
Year 2
Depreciation
11,070
60,000
Year 2
Depreciation 20% 3
60,000
52,860
Year 3
Depreciation
11,070
Depreciation
11,070
30,720
12,000
48,000
Year 3
Depreciation 20% 3
48,000
41,790
Year 4
15,000
9,600
38,400
Year 4
Depreciation 20% 3
38,400
7,680
30,720
75,000 2 30,720
*Depreciation 5 _______________
5 11,070
4
49
19.3X
(a)
Reducing Balance
Cost
Year 1
Year 2
Year 3
Year 4
19,200
9,600
9,600
4,800
4,800
2,400
2,400
1,200
1,200
Depreciation 50% of 19,200

(b)
Straight Line
Cost
Year 1
Year 2
Year 3
Year 4
19,200
4,500
14,700
4,500
10,200
4,500
5,700
4,500
1,200
Depreciation
Depreciation
Depreciation
Depreciation
Accounting
19,200 2 1,200 5 18,000 4 4 5 4,500
19.4X
Computer Equipment
(a) Straight Line
Cost
Year 1
Depreciation
Year 2
Depreciation
3,600
1,000
Year 2
Year 3
Depreciation
2,600
1,000
Year 3
Year 4
Depreciation
1,600
1,000
Year 4
Depreciation 4,600 2 600 1,000

*___________________________________
50
4,600
* 1,000
600
Cost
Year 1
Depreciation 25% 3
4,600
Depreciation 25% 3
3,450
Depreciation 25% 3
2,588
Depreciation 25% 3
1,941
4,600
1,150
3,450
862
2,588
647
1,941
485
1,456
19.5X
(a)
Reducing Balance
Cost
Year 1
72,900
Depreciation 33__13% of 72,900
24,300
Year 2
48,600
16,200
Year 3
32,400
10,800
Year 4
21,600
7,200
Year 5
14,400
4,800
9,600
(b)
Straight Line
Cost
72,900
Depreciation
Year 2
60,240
Depreciation
Year 3
12,660
12,660
47,580
Depreciation
12,660
Accounting
Year 1
34,920
Year 4
Depreciation
Year 5
Depreciation
12,660
22,260
12,660
9,600
72,900 2 9,600 5 63,300 4 5 5 12,660
51
19.6
Dumper
(a) Reducing Balance
(b) Straight Line
Cost
Year 1
18,000
Depreciation 40% 3
18,000
Year 2
Year 3
Year 1
Depreciation
Year 2
13,000
Depreciation
Year 3
Depreciation
3,888
19.7X
(a) Machinery has straight line depreciation; fixtures has reducing balance.
(b) Machinery: 4,800 2 1,600 2 1,600 1,600
Fixtures: 2,025 2 506 2 380 1,139
(c) Machinery: 8,000 2 2,000 2 1,500 2 1,125 2 844 5 2,531
(Depreciation rate is 25% p.a.)
Accounting
5,000
2,592
18,000 2 3,000
5,000
8,000
Depreciation ______________

5,000
3
52
5,000
4,320
6,480
Depreciation 40% 3
6,480
18,000
7,200
10,800
Depreciation 40% 3
10,800
3,000
Answers
Chapter 20: Double entry for depreciation and
disposal of a fixed asset
20.1
(a)
Motor Car Account
Dr
2001
Jan-01
Cr
12,500
Bank
(b)
2001
Dec-31
2002
Dec-31
Provision for Depreciation - Motor Car Account
Cr
Balance c/d
2,500
2001
Dec-31
Profit and loss a/c
Balance c/d
4,500
2002
Jan-01
Dec-31
Balance b/d
Profit and loss a/c
2,500
2,000
4,500
2003
Jan-01
Dec-31
Balance b/d
Profit and loss a/c
4,500
1,600
6,100
2004
Jan-01
Balance b/d
6,100
4,500
2003
Dec-31
Balance c/d
6,100
6,100
2,500
Accounting
Dr
(c)
Profit and Loss Account (extracts) for the year ended 31 December
2001
Depreciation
2,500
2002
Depreciation
2,000
2003
Depreciation
1,600
(d)
Balance Sheet (extracts) as at 31 December
2001
Motor Car
Cost
12,500
Total Depreciation
2,500
Net book value
10,000
2002
Motor Car
12,500
4,500
8,000
2003
Motor Car
12,500
6,100
6,400
53
20.2X
(a)
Straight Line Method
Dr
Machinery Account
2001
Nov 01
Bank
Dr
Balance c/d
2004
Oct 31
Accounting
2004
Oct 31
(c)
5,400
5,400
2002
Oct 31
Cr
Profit and loss a/c
1,800
Nov 1
2003
Oct 31
Balance b/d
1,800
Profit and loss a/c
1,800
3,600
Nov 1
Balance b/d
3,600
2004
Oct 31
Profit and loss a/c
1,800
5,400
Nov 1
Balance b/d
5,400
Reducing Balance Method

Machinery Account
2001
Nov 01
2003
Oct 31
3,600
3,600
Balance c/d
Dr
2002
Oct 31
1,800
Balance c/d
2003
Oct 31
Dr
Provision for Depreciation - Machinery Account
2002
Oct 31
(b)
Cr
18,000
Cr
18,000
Bank
Provision for Depreciation - Machinery Account

Balance c/d
Balance c/d
Balance c/d
1,800
3,420
3,420
4,878
4,878
2002
Oct 31
Cr
Profit and loss a/c
1,800
Nov 1
2003
Oct 31
Balance b/d
1,800
Profit and loss a/c
1,620
3,420
Nov 1
Balance b/d
3,420
2004
Oct 31
Profit and loss a/c
1,458
4,878
Nov 1
Balance b/d
4,878

Profit and Loss Account (extracts) for the year ended 31 October
54
2002
Depreciation - Machinery
1,800
2003
1,800
2004
1,800
Balance Sheet (extracts) as at 31 October

2002
Machinery
Cost
18,000
Total Depreciation
1,800
Net Book Value
16,200
2003
Machinery
18,000
3,600
14,400
2004
Machinery
18,000
5,400
12,600
(d)
Reducing Balance Method

Profit and Loss Account (extracts) for the year ended 31 October
2002
1,800
2003
1,620
2004
1,458
Balance Sheet (extracts) as at 31 October

2002
Machinery
Cost
18,000
Total Depreciation
1,800
Net Book Value
16,200
2003
Machinery
18,000
3,420
14,580
2004
Machinery
18,000
4,878
13,122
Computer equipment
disposals
9,500
Accounting
20.3
(a)
Computer Equipment Account
2001
Jan-01
Balance b/d
9,500
2004
Jan-01
(b)
Provision for Depreciation : Computer Equipment Account
2001
2001
Computer
equipment
Dec-31
Balance c/d
1,900
Jan-01
2002
Dec-31
Balance c/d
3,800
2002
Jan-01
Dec-31
Balance b/d
Profit and loss
1,900
1,900
3,800
2003
Jan-01
Dec-31
Balance b/d
Profit and loss
3,800
1,900
5,700
2004
Jan-01
Balance b/d
5,700
3,800
2003
Dec-31
Balance c/d
5,700
5,700
2004
Jan-01
Computer equipment
disposals
5,700
1,900
55
(c)
Computer Equipment Disposals Account
2004
Jan-01
Dec-31
Computer
Profit and loss
2004
Jan-01
Jan-01
9,500
450
9,950
Depreciaiton
Bank
5,700
4,250
9,950
(d)
Profit and Loss Account (extracts) for the year ended 31 December
2001
Depreciation - Computer Equipment
1,900
2002
1,900
2003
1,900
(e)
Balance Sheet (extracts) as at 31 December
2001
Computer Equipment
Cost
9,500
Total Depreciation
1,900
Net book value
7,600
2002
Computer Equipment
9,500
3,800
5,700
2003
Computer Equipment
9,500
5,700
3,800
Provision for depreciation
9,700
Bank
1,850
20.4X
Accounting
(a)
Motor Van Disposals Account
Motor Van
12,000
Profit and loss : loss on sale

12,000
450
12,000
(b)
Machinery Disposals Account
Machinery
Profit and loss : profit on sale
27,900
2,770
19,400
Bank
11,270
30,670
30,670
(c)
Fixtures Disposals Account
Fixtures
8,420

Bank
Profit and loss : loss on sale
8,420
56
7,135
50
1,235
8,420
(d)
Buildings Disposals Account
Buildings
200,000
Profit and loss : profit on sale
59,000
110,000
Bank
149,000
259,000
259,000
20.5
(a)
_________________

No. of Years
35,000 211,000

6,000 per annum
______________
Cost 2 Scrap Value
(b)
Provision for Depreciation - Vehicles Account
2005
Mar-31
2006
Mar-31
Balance c/d
Balance c/d
7,000
12,600
12,600
2005
Mar-31
Profit and loss
7,000
Balance b/d
7,000
Apr-01
2006
Mar-31
Profit and loss
5,600
12,600
Apr-01
Balance b/d
12,600
WORKINGS
Year ended 31/03/05

20% 3 35,000 7,000 per annum
Year ended 31/03/06

20% 3 (35,000 2 7,000) 5,600 per annum
(c)

Any two from:

Wear and tear, obsolence, time factors, inadequacy, depletion.
Cr
Accounting
Dr
20.6X
(a)
RIALTO TRADERS
Plant and Machinery Account
2007
May 1
Balance b/d
500,000
2007
Dec 31
2008
Apr 30
500,000
2008
May 1
Balance b/d
Plant and machinery

disposals
200,000
Balance c/d
300,000
500,000
300,000
57
(b)
Motor Vehicles Account
2007
May 1
2008
Feb 1
May 1
Balance b/d
200,000
Bank
100,000
300,000
Balance b/d
300,000
2008
Apr 30
Balance c/d
300,000
300,000
(c)
Provision for Depreciation - Plant and Machinery Account
2007
Dec 31
2008
Apr 30
Plant and MachineryDisposals
150,000
Balance c/d
80,000
230,000
2007
May 1
Balance b/d
200,000
2008
Apr 30
Profit and Loss
30,000
230,000
May 1
Balance b/d
80,000
(d)
Plant and Machinery - Disposal Account
2007
Dec 31
Plant and Machinery
200,000
2007
Dec 31
Dec 31
Dec 31
Accounting
200,000
58
Provision for
Depreciation
Bank
Profit and Loss
150,000
40,000
10,000
200,000
(e) (i) Concept 1 Consistency

Concept 2 Accruals

(ii) It is important to apply the consistency concept so that comparisons can be
made between different years. Therefore in the above example depreciation is
changed at 10% using the straight line method, the company needs to be
consistent in using this method and the rate of depreciation in future final
accounts.
In applying the accruals concept the benefit that a fixed asset provides over its
useful life is matched with the depreciation for the same period.
Answers
Chapter 21: Bad debts and provision for
doubtful debts
(a)
Hart & Partners

Dr
Bad Debts Account
2009
May-16
Jul-31
Nov-09
S Bayley
J Carter
T Roche
2009
Dec-31
550
223
467
1,240
Dr
Profit & loss
Provision For Doubtful Debts Account
Cr
Profit & loss
520
Profit and Loss Account for the year ended 31 December 2009 (extracts)
Gross profit
Less Expenses
Bad debts written off
Provision for doubtful debts
(c)
1,240
520
1,760
26,000
520
25,480
Balance Sheet as at 31 December 2009 (extract)

Current Assets
Debtors
Less Provision for doubtful debts
21.2
1,240
1,240
2009
Dec-31
(b)
Cr
Date
31-Dec
2007
2008
2009
2010
Total debtors
7,000
8,000
6,000
7,000
Profit and
loss
70
10
20
10
Dr/Cr
Dr
Dr
Cr
Dr
Accounting
21.1
Final figure for

balance sheet
6,930 (net)
7,920 (net)
5,940 (net)
6,930 (net)
59
21.3X
Bad Debts
2007
31 Dec
2008
31 Dec
Debtors
Debtors
298
2007
31 Dec
Profit and loss a/c
298
386
2008
31 Dec
Profit and loss a/c
386
Profit and loss a/c
344
Profit and loss a/c
477
2009
31 Dec
Debtors
344
2009
31 Dec
2010
31 Dec
Debtors
477
2010
31 Dec
Provision for Doubtful Debts

2007
31 Dec
2008
31 Dec
100
Balance c/d
Balance c/d
130
2007
31 Dec
Profit and loss a/c
100
2008
1 Jan
31 Dec
Balance b/d
Profit and loss a/c
100
30
130
2009
1 Jan
Balance b/d
130
130
2009
31 Dec
31 Dec
Profit and loss a/c

Balance c/d
15
115
130
130
2010
31 Dec
Balance c/d
150
2010
1 Jan
31 Dec
Balance b/d
Profit and loss a/c
115
35
150
2011
1 Jan
Balance b/d
150
Accounting
150
60
Profit and Loss Accounts

for the years ended 31 December (extracts)
2007
Bad debts
2008
Bad debts
2009
Bad debts
2010
Bad debts
298
100
386
30
344
477
35
2009
15
Balance Sheet as at 31 Decemeber (extracts)

Debtors
12,000
100
11,900
2008
Debtors
15,000
130
14,870
2009
Debtors
14,000
115
13,885
2010
Debtors
18,000
150
17,850
2007
21.4X (a)
The Journal
Date
Apr 30
Bad Debts
A. Carter
Being bad debt written off
Debit
Credit
500
500
(b) Double entry for the creation of a Provision for Doubtful Debts
Debit: Profit and Loss Account
Credit: Provision for Doubtful Debts Account
Accounting
(c) The prudence concept requires that the financial statements provide a true and fair
view of the business at the date of the balance sheet. In addition profits should also
reveal a correct and true figure. Therefore any anticipated losses need to be
accounted for in the profit and loss account. Providing for a provision for doubtful
debts anticipates any potential loss should a debtor fail to pay. By deducting the
provision from the debtors in the balance sheet a more accurate figure of debtors is
given.
61
Answers
Chapter 22: Accruals, prepayments and other
adjustments for financial statements
22.1
(a)
C Homer
Rent Account
2008
Dec-31
Dec-31
Bank
Owing c/d
1,600
400
2,000
2008
Dec-31
Owing b/d
400
Profit and loss

Prepaid c/d
635
265
900
Profit and loss
7,381
Insurance Account
2008
Dec-31
Bank
900
2008
Dec-31
Dec-31
900
2009
Jan-01
Prepaid b/d
(c)
2008
Dec-31
Dec-31
Accounting
265

Bank
Owing c/d
7,215
166
7,381
2008
Dec-31
7,381
2009
Jan-01
(d)
Owing b/d
Bank
Jul-01
Bank
2009
Jan-01
Prepaid b/d
(e)
750
2008
Dec-31
Profit and loss
1,125
Dec-31
Prepaid c/d
1,500
375
1,875
375
Rents Receivable Account

2008
Dec-31
Dec-31
166
Rates Account
2008
Jan-01
1,875
62
2,000
2,000
2009
Jan-01
(b)
Profit and loss
Profit and loss

In advance c/d
4,800
1,600
6,400
2008
Apr-15
Dec-15
Bank
Bank
2,000
4,400
6,400
2009
Jan-01
In advance b/d
1,600
22.2
(a)
T Norton
General Expenses Account
2009
Dec-31
Dec-31
Bank
Owing c/d
615
56
671
2009
Dec-31
671
671
2010
Jan-01
(b)
Profit and loss
Owing b/d
56
Telephone Account
2009
Dec-31
Dec-31
Bank
Owing c/d
980
117
1,097
2009
Dec-31
1,097
1,097
2010
Jan-01
(c)
Profit and loss
Owing b/d
117
Bank
Owing c/d
3,056
175
3,231
Commission Received Account

Profit and loss
3,231
2009
Dec-31
Dec-31
3,231
2010
Jan-01
Owing b/d
(d)
175
Accounting
2009
Dec-31
Carriage Outwards Account

2009
Dec-31
Dec-31
Bank
Owing c/d
666
122
788
2009
Dec-31
788
788
2010
Jan-01
(e)
Profit and loss
Owing b/d
122
Insurance Account
2009
Jan-01
Oct-01
Bank
Bank
2010
Jan-01
Prepaid b/d
1,080
1,080
2,160
2009
Dec-31
Dec-31
Profit and loss

Prepaid c/d
1,440
720
2,160
720
63
22.3X
(a)
T Dale
Stationery Account
2008
01 Jul
2009
30 Jun
Stock b/d
Cash and bank
(b)
290
855
1,145
2009
30 Jun
2009
30 Jun
Profit and loss

Stock c/d
Cash and bank

Owing c/d
(c)
590
90
680
2008
01 Jul
2009
30 Jun
Owing b/d
Profit and loss
616
Rent and Rates Account
2009
30 Jun
30 Jun
Cash and bank

Owing c/d
3,890
360
2009
30 Jun
30 Jun
Owing b/d:
Rent
Rates
Profit and loss
Rent prepaid
and c/d
4,250
Accounting
64
680
2008
01 Jul
(d)
160
205
3,635
250
4,250
2009
30 Jun
Cash and bank
4,750
30 Jun
Owing c/d
375
5,125
(e)
2008
01 Jul
Owing b/d
2009
30 Jun
Profit and loss
180
4,945
5,125
Commission Receivable Account

2008
01 Jul
2009
30 Jun
Owing b/d
Profit and loss
80
915
995
345
1,145
General Expenses Account
2009
30 Jun
30 Jun
64
800
2009
30 Jun
30 Jun
Cash and bank

Owin c/d
850
145
995
C Cainen
Trading and Profit and Loss Account
for the year ended 31 December 2009
Sales
Opening stock
Add Purchases
Less Closing stock
Gross Profit
Less Expenses
Rent (640 2 160)
Wages and salaries (2,140 1 290)
Insurance (590 2 190)
Bad debts
Telephone (300 1 110)
General Expenses
Net Profit
22.5
18,590
2,050
11,170
13,220
3,910
9,310
9,280
480
2,430
400
270
410
180
4,170
5,110
K Tyler
Sales
Less Sales returns
Opening stock
Add Purchases
Less Closing stock

Gross Profit
Less Expenses
Motor expenses
Rent and rates (1,200 2 160)
Discounts allowed
Lighting expenses (580 1 170)
Computer running expenses (1,210 2 140)
General expenses
Depreciation : Motor vehicles
Net Profit
54,190
200
8,620
30,560
39,180
12,120
5,470
2,120
1,040
290
750
1,070
360
700
53,990
Accounting
22.4
27,060
26,930
11,800
15,130
65
22.6X
J Sears
Sales
Less Sales returns
80,000
1,000
79,000

Opening stock
Add Purchases
Less Purchase returns
Less Closing stock

Gross Profit
Less Expenses
Telephone (200 2 20)
Bad debts
Provision for doubtful debts (1,960 3 10% 2 160)
Depreciation:
Store fittings
Motor van
Net Profit
20,000
70,000
90,000
1,240
88,760
24,000
64,760
14,240
7,650
180
40
36
800
1,200
9,906
4,334
J Sears
Accounting
Cost
Fixed Assets
Store fittings
Motor van
Current Assets
Stock
Debtors
Prepaid expenses
Bank
1,960
196

Creditors
Expenses owing
Net current assets
1,400
450
Financed by:
Capital
Balance 1.1.2010
Add Net profit
Less Drawings
66
8,000
6,000
14,000
Depreciation
Net Book
Value
800
1,200
2,000
7,200
4,800
12,000
24,000
1,764
20
600
26,384
1,850
24,534
36,534
35,800
4,334
40,134
3,600
36,534
Answers
Chapter 23: Incomplete records
23.1
(a)
Total Debtors
Balances b/d
Sales (difference)
2,760
14,940
17,700
Cash
Balances c/d
14,610
3,090
17,700
Total Creditors
Cash
Balances c/d
(b)
9,390
1,320
10,710
Balances b/d
Purchases (difference)
1,080
9,630
10,710
K Rogers
Trading Account for the year ended 31 October 2009
Sales
Less Cost of Goods sold
Opening Stock
Add Purchases
2,010
9,630
11,640
2,160
Less Closing Stock

Gross Prot
23.2X
14,940
9,480
5,460
2008
1 Jun
2009
31 May
Balance b/d
Sales
5,670
45,550
51,220
2009
31 May
Bank
45,112
31 May
Balance c/d
6,108
51,220
Balances b/d
3,410
Accounting
Total Debtors
Total Creditors
2009
31 May
31 May
Bank
Balances c/d
29,375
4,126
33,501
2008
1 Jun
2009
31 May
Purchases
30,091
33,501
Trading Account for the year ended 31 May 2009
Sales
Less Cost Of Goods Sold
Opening Stock
Add Purchases
Less Closing Stock
Gross Profit
11,590
30,091
41,681
13,425
45,550
28,256
17,294
67
23.3 (a) Capital is 62,550

(b)
D Lewinski
Fixed assets
Plant
Fixtures
36,000
3,600
39,600
Current assets
Stock
Debtors
Bank
Cash
13,500
9,300
6,000
1,350
30,150

Creditors
Net current assets
7,200
22,950
62,550
Financed by:
Capital
Cash introduction
Add Net profit
60,000
18,550
78,550
16,000
Less Drawings
62,550
23.4
J Marcano
Statement of Affairs as at 31 August 2009
Accounting
Fixed assets
Fixtures
Motor Van
Current assets
Stock
Debtors
Bank
Cash
3,500
3,500
7,000
16,740
11,890
2,209
115
30,954

Creditors
9,952
21,002
28,002
68
Statement of Affairs as at 31 August 2009
Fixed assets
Fixtures
Less Depreciation
Motor Van
Less Depreciation
5,500
300
3,500
700
Current assets
Stock
Debtors
Bank
Cash
5,200
2,800
8,000
24,891
15,821
72
84
40,868

Trade creditors
Expenses owing
Bank overdraft
Net current assets
6,002
236
165
6,403
34,465
42,465
Capital
Balance as at 31/08/2009
Add Cash introduced
Add Net profit
(C)
(B)
Less Drawings
28,002
12,800
9,223
50,025
7,560
(A)
Found as the figure to make balance sheet totals agree 42,465.
(B)
Less 7,560 5 (A) 42,465, therefore (B) is 50,025.
(C)
Missing figure to total 50,025 5 9,223.
42,465
Accounting
(A)
23.5X
(a)
Total Debtors Account
Dr
2008
1 Apr
2009
31 Mar
Balances b/d
Cr
2,980
Sales
11,520
2009
31 Mar
31 Mar
Cash
Balances
(difference) c/d
14,500
Dr
2009
31 Mar
31 Mar
14,500
Total Creditors Account
Cash
Balance (difference) c/d
7,780
2,220
10,000
10,820
3,680
2008
1 Apr
2009
31 Mar
Cr
Balance b/d
1,880
Purchases
8,120
10,000
69
(b)
A Hanson
Calculation of Capital as at 31 March 2008 and 31 March 2009
31.3.2008
1,460
600
2,320
60
2,980
7,420
1,880
5,540
Bank
Office furniture
Stock
Cash
Debtors
Less Creditors
Capital
(c)
Capital as at 31 March 2008
Add Net profit
(B)
(A)
31.3.2009
1,740
500
2,620
80
3,680
8,620
2,220
6,400
5,540
3,400
8,940
Less Drawings
2,540
Capital as at 31 March 2009
6,400
Note: By arithmetical deduction, (A) is 8,940. Thus 5,540 1 (B) 5 8,940, i.e (B)
is 3,400.
23.6X
(a) (i)
Total Debtors Account
Accounting
Dec-01
Balances b/d
Sales
450
7,628
8,078
Calculation of Sales
Credit Sales
Cash Sales
Drawings 12 3 1,500
7,628
200,552
18,000
226,180
70
Nov 30
Nov 30
Bank
Balance c/d
7,500
578
8,078
(ii)
Rent Account
Dec 01
Nov 30
Balance b/d
Bank
Nov 30
Nov 30
Bank
Balance c/d
(iii)
Nov 30
Nov 30
Profit and loss

Balance c/d
8,760
490
9,250
Nov 30
Profit and loss
700
Dec 1
Balance b/d
700
100
Loan Interest Account

600
100
700
he loan interest needs adjusting so that the amount incurred for the year is
T
ultimately charged to the profit and loss account i.e 7% 3 10,000 5 700.
According to the records only 600 has been paid, therefore the difference
between the amount due and paid (700 2 600 5 100. 100 needs to be
accrued. The whole of the interest i.e. 700 is charged to the profit and loss
account. The interest owing 100 is shown as a current liability so giving a true
balance sheet. Without the adjustment the profit would be inaccurate.
Accounting
(b)
350
8,900
9,250
71
Answers
Chapter 24: Accounting for non-profit
making organisations
24.1
(a) A receipts and payments account is a summary of the cash book that shows
the sources and uses of money for a non-profit making organisation.
An income and expenditure account is the same as a business's proft and loss
account. However, any surplus is not classed as profit but is called 'surplus of
income over expenditure' any loss incurred is stated as 'excess of expenditure
over income'.
(b) Capital - is the total resources invested in a business by the owner(s) and is
represented by assets - liabilities. Accumulated fund - this is in effect the
same as the capital account in that it is the difference between an
organisation's assets and liabilities.
(c) Profit is the difference between the selling price of goods and their cost less any
expenses incurred in running the business. A surplus of income over expenditure
is the equivalent of a business's profit for a non-profit making organisation.
24.2
(a)
Horton Hockey Club
Receipts and Payments Account
for the year ended 30 June 2009
Accounting
Receipts
Bank balance b/f
Subscriptions
Donations
Receipts from rafes
2,715
8,570
1,500
3,816
Payments
Teams' travel expenses
Groundsman wages
Postage and stationery
Rent of pitches and club house
1,598
3,891
392
4,800
General expenses
419
Prizes for rafes
624
Bank balance c/f
4,877
16,601
16,601
(b)
Horton Hockey Club
Income and Expenditure Account
Income:
Subscriptions (8,570 1 160)
Donations
Profit on rafes (3,816 2 624)
Less Expenditure:
Teams' travel expenses
Groundsman's wages (3,891 1 75)
Postage and stationery
Rent of pitches and club house (4,800 1 400)
General expenses
Surplus of income over expenditure
72
8,730
1,500
3,192
13,422
1,598
3,966
392
5,200
419
11,575
1,847
24.3X
(a)
Superball Football Club
Receipts and Payments Account for the year ended 31 May 2009
Receipts
Cash & bank balnces b/d
Subscriptions
Disco receipts
Collections at matches
Prize money
905
8,124
3,149
5,090
1,000
Payments
Hire of transport
Ground maintenance costs
Groundsman's wages
Committee expenses
Costs of disco
3,710
1,156
5,214
906
1,112
Rent of ground
2,450
General expenses
814
Cash & bank balances c/d

18,268
2,906
18,268
(b)
Superball Football Club
Income and Expenditure Account for the year ended 31 May 2009
Income:
Subscriptions (8,124 2 160 1 94)
Profit on disco (3,149 2 1,112)
Collections at matches
Prize money received
8,058
2,037
5,090
1,000
16,185
Hire of transport (3,710 1 90)
3,800
Ground maintenance costs
1,156
Groundsman's wages
5,214
Committee expenses (906 1 170)
1,076
Rent of ground (2,450 2 200)
2,250
General expenses
814
Accounting
Less Expenditure:
14,310
1,875
73
24.4
(a) Accumulated fund as at 1 June 2007:
Bar Stocks
88
Equipment
340
Bank Balance
286
714
(b)
Down Town Sports and Social Club
Bar Trading Account
Year Ended 31 May 2008
Bar Takings
Opening stock
463
88
Add Purchases
397
485
Less Closing Stock
101
384
79
Gross Profit
(c)
Down Town Sports and Social Club
Year Ended 31 May 2008
Accounting
Income
Subscriptions (135 1 14)
Net proceeds of jumble sale
Net proceeds of dance
149
91
122
Gross profit from bar
79
441
Less Expenditure
Wages
198
Hire of rooms
64
Loss on sale of equipment (92 2 80)
12
Depreciation : equipment
30
74
304
137
24.5X
(a)
Sevenoaks College Drama Society
Trading Account
Year Ended 31 December 2010
Sale of refreshments
Opening stock
100
Add Purchases
845
1,200
945
Less Closing Stock
165
780
420
Gross Profit
(b)
Year Ended 31 December 2010
Income
Subscriptions
Profit on sale of refreshments
Ticket sales
1,600
420
4,000
6,020
Expenditure
850
Rent of theatre
750
Administrative expenses
440
*Depreciation of scenery
2,000
4,040
Accounting
Hire of costumes (1,500 - 650)
1,980
(c)
Fixed Assets
Scenery (at valuation)
Current Assets
Stock of refreshments
Subscriptions in advance
Bank Overdraft
12,500
165
90
595
685
(520)
11,980
Represented by
Accumulated Fund
Add Surplus of income over expenditure
* Workings - Scenery - Balance as at 1 January 2010

Add Purchase of new scenery
Less Value as at 31 December 2010
Depreciation
10,000
1,980
11,980
7,500
7,000
14,500
14,000
2,000
75
Accounting
24.6X (a) Accumulated fund this is a form of capital account for a non-profit making
organisation and represents the net worth of club. It can be found by
deducting liabilities from the assets.
A surplus is the amount that income exceeds expenditure and is the same as
the profit made by a business.

(b) In the balance sheet subscriptions in arrears would appear under Current
Assets and rent of cricket pitch accrued under Current Liabilities.

(c) (i) Receipts and payments account is a summary of the cash book for a
club or society and details all cash received and payments made.
(ii) Current Assets.
(iii) Payment for the purchase of a fixed asset.
(iv) Depreciation of a fixed asset.

(d) Since the donation is a substantial amount it would be added to the
accumulated fund in the balance sheet. The reason for this is that the
donation is not a regular income but a one off receipt and as such should
not be shown on the income expenditure account.
76
Answers
Chapter 25: Manufacturing accounts
25.1
E Smith
Manufacturing and Trading Account
for the year ended 31 March 2009
Stock of raw material 1.4.2008

Add Purchases
Carriage inwards
Less Stock of raw materials 31.3.2009
Cost of raw materials consumed
Manufacturing wages
Prime cost
Add factory overhead expenses
Rent and rates
Power
2,300
6,220
Other expenses
1,430
2,400
21,340
321
24,061
2,620
21,441
13,280
34,721
Less Work in progress 31.3.2009
9,950
44,671
955
45,626
870
Production cost of goods completed c/d
44,756
Sales
69,830
Add Work in progress 1.4.2008
Less Stock finished goods 31.3.2009

Gross profit
6,724
44,756
51,480
7,230
Accounting

Stock finished goods 1.4.2008
Add Production cost of goods completed b/d
44,250
25,580
77
25.2X
P Lucas
Manufacturing, Trading and Profit and Loss Account
for the year ended 30 September 2009
Stock of raw materials 1.10.2008

Add Purchases
Carriage inwards
38,720
2,720
Less Stock of raw materials 30.9.2009

Manufacturing wages
Prime cost
Factory Overhead Expenses
Power
Factory expenses
Depreciation: Plant and machinery
6,120
12,650
7,560
Add Work-in-progress 1.10.2008

Less Work-in-progress 30.9.2009
Production cost of goods completed c/d
Sales
86,840
99,220
14,570
Accounting
Less Stock of finished goods 30.9.2009

Gross profit c/d
Less Expenses:
Salesmen's salaries and expenses
26,420
Office and administration expenses
25,910
Net Profit
78
26,330
86,230
3,070
89,300
2,460
86,840
12,380
Add Production cost of goods completed b/d
Office equipment
41,440
49,900
10,970
38,930
20,970
59,900
174,610

Stock of finished goods 1.10.2008
Delivery van expenses

Advertising
Depreciation:
Delivery van expenses
8,460
84,650
89,960
5,890
5,080
3,040
807
3,847
67,147
22,813
25.3X
(a)
Joey Peterson
Manufacturing Account for the year ended 30 June 2010
Stock of raw materials 1.7.2009

Add Purchases
Less Stock of raw material 30.6.2010
Direct Wages (450,000 1 8,900)
Direct factory power
Prime cost
Add Indirect manufacturing cost
Factory rent and rates
Indirect factory wages
General expenses
96,000
98,600
14,400
Insurance (66,900 2 6,900) 3 __13
20,000
Depreciation : Plant and Machinery
50,000
Add Work in progress 1.7.2009

Less Work in progress 30.6.2010
81,600
314,000
395,600
94,500
301,100
458,900
40,000
800,000
279,000
1,079,000
125,300
1,204,300
154,300
Production Cost
1,050,000
(b)
Trading Account for the year ended 30 June 2010
Less Stock of furnished goods 30.6.2010
2,000,000
Accounting
Sales
Stock of finished goods 1.7.2009
Add Production Cost
115,440
1,050,000
1,165,440
85,440
Gross Profit
1,080,000
920,000
25.4X
(a) (i) Cost of raw materials consumed 560,000
(ii) Prime cost 1,280,000
(iii) Total factory overheads 740,000
(iv) Value of closing stock of work in progress 80,000
3,000,000
(b) (i) Selling price of one engine 1 2,000,000 1 50% 5 _____________

1,000 engines

5 3,000
(ii) Total gross profit 5 750 engines 3 1,000 5 750,000
(iii) Value of closing stock of finished goods based on factory cost of
production : 250 engines 3 2,000 5 500,000
79
Answers
Chapter 26: Partnership accounts
26.1
(a)
Stead and Jackson
Appropriation Account
45,000
5,000
40,000
Net profit
Less Salary: Jackson
Balance of profits shared:
1
__
Stead
2
Jackson
20,000
1
__
20,000
40,000
(b)
Capital Accounts
Stead
Jackson
2010
Dec 31 Balance b/d
Stead
Jackson
24,000
16,000
Stead
Jackson
2,300
20,000
22,300
3,500
5,000
20,000
28,500
7,300
9,500
(c)
Current Accounts
Accounting
2010
Dec 31 Drawings
Dec 31 Balances c/d
Stead
Jackson
15,000
7,300
19,000
9,500
22,300
28,500
2010
Dec 31 Balance b/d
Dec 31 Salary
Dec 31 Share of profits
2011
Jan 1 Balance b/d
26.2X (a)
Wain, Brown and Cairns
Appropriation Account for the year ended 31 March 2010
Net profit
Less: Salaries
Wain
10,000
Brown
8,000
Balance of profits shared:

Wain 50%
80
60,000
18,000
42,000
21,000
Brown 30%
12,600
Cairns 20%
8,400
42,000
(b)
Capital Accounts
Wain
Brown
Cairns
2010
Mar 31
Balance b/d
Wain
Brown
Cairns
30,000
50,000
70,000
Wain
Brown
Cairns
2,400
3,100
5,700
10,000
8,000
21,000
12,600
8,400
Current Accounts
Wain
2010
Mar 31
Drawings
Mar 31
Balances c/d
Brown
Cairns
12,000
15,050
14,980
21,400
8,650
2010
Mar 31
Balance b/d
Mar 31 Salaries
Mar 31 Share
of profits
Mar 31
Balances c/d
33,400
2010
Apr 1
Balance b/d
23,700
14,980
880
2010
Apr 1
Balance b/d
880
33,400
23,700
14,980
21,400
8,650
26.3
Simpson and Young
Tradign and Prot and Loss Appropriation Account
Opening stock
18,000
Add Purchases
184,980
202,980
19,000
Less Closing stock

Gross profit
Less Expenses:
Wages and salaries (32,700 500)
Rent, Rates and insurance (3,550 250)
Electricity
Stationery and printing
Motor expenses
General office expenses
Depreciation: Motor van (20% of 16,000)
Office equipment (10% of 5,600)
Net profit
Less interest on capital:
Simpson (10% of 50,000)
Young (10% of 20,000)
Share of profits:
Simpson 3/5ths
Young 2/5ths
33,200
3,300
980
420
3,480
1,700
3,200
560
5,000
2,000
10,020
6,680
254,520
Accounting
Sales
Less Cost of sales:
183,980
70,540
46,840
23,700
7,000
16,700
16,700
81
Simpson and Young

Cost
Fixed assets
Buildings
Office equipment
Motor vans
Current assests
Stock
Debtors
Prepayments
Cash at bank
Less Current liabilites
Creditors
Accruals
Net current assets
Financed by:
Capital accounts
Balance b/f
Accounting
Current accounts
Balance b/f
Add Share fo profit
Add Interest on capital
Less Drawings
Accumulated
Depreciation
28,000
8,400
16,000
52,400
3,360
8,200
11,560
19,000
28,000
250
7,250
54,500
15,200
500
15,700
Young
20,000
Total
70,000
640
10,020
5,000
15,660
10,000
5,660
300
6,680
2,000
8,980
5,000
3,980
9,640
79,640
8,400 5,600 560 3,360
(W2) Provision for depreciation on motor vans:
82
28,000
5,040
7,800
40,840
Simpson
50,000
(W1) Provision for depreciation on office equipment:
(W1)
(W2)
38,800
79,640
Net Book
Value
16,000 11,000 3,200 8,200
26.4X
(a)
Michael and Morgan
Profit and Loss Account (Including Appropriation)
for the year ended 30 September 2009
385,000
15,000
400,000
Gross Profit
Add Discounts Received
Less Expenses
Administrative Expenses
Advertising (7,375 125)
Rent and rates (12,000 2 1,500)
Wages and salaries (135,000 5,000)
Depreciation - Shop fittings *
Net Profit
Less Salary - Michael
6,790
7,500
10,500
140,000
12,000
Share of profits: Michael 2/5ths

Morgan 3/5ths
176,790
223,210
30,000
193,210
77,284
115,926
193,210
2
(b)
Balance b/d
Drawings
Balance c/d
1,500
9,650
96,259
107,409
Sep 30
Sep 30
Sep 30
Salary
Profit share
Advertising
30,000
77,284
125
107,409
Oct 01
Balance b/d
96,259
Accounting
Michael Current Account

Oct 01
Sep 30
Sep 30
(c)
Michael and Morgan
Balance Sheet Extract as at 30 September 2009
Michael
50,000
Morgan
40,000
(1,500)
2,000
Add Share of Profits
77,284
115,926
Add Salary
30,000
Capital Accounts Balance

Current Accounts
Balance
Add Advertising
Less Drawings
125
105,909
117,926
9,650
8,200
96,259
109,726
Total
90,000
205,985
295,985
* Workings
Shop fittings : Cost
Less : Depreciation to date
76,000
28,000
48,000
Reducing Balance Method 5 25% 3 48,000 5 12,000

83
Answers
Chapter 27: Limited company accounts
27.1
(a)
C Blake Ltd
Appropriation Account for the year ended 31 December 2009
Net profit b/d

Less Appropriations
Transfer to General Reserve
Dividends payable:
11,340
1,500
1,000
7,500
Preference dividend 10% (10,000 3 10%)

Ordinary dividend 12.5% (60,000 3 12.5%)
10,000
1,340
Retained profits carried forward to next year

C Blake Ltd
(b)
Fixed Assets
Buildings at cost
Equipment at cost
Less Accumulated depreciation
45,000
4,500
50,000
40,500
90,500
Accounting
Current Assets
Stock
Debtors
8,800
4,120
350
Bank (balancing figure)

Cash
3,770
9,660
2,160
24,390
Less Creditors: amounts falling due within one year

Creditors
Dividends payable (1,000 1 7,500)
3,550
8,500
12,050
12,340
102,840
Less Creditors: amounts due after more than one year

30,000
Debentures
72,840
Financed by:
Share Capital
Called-up share capital
60,000 ordinary 1 shares
10,000 preference 1 shares
Revenue reserves
General reserve
Profit and loss account
60,000
10,000
1,500
1,340
70,000
2,840
72,840
Note: The Authorised Share Capital is 90,000 1 ordinary shares and 10,000 - 10% preference shares.
84
27.2X
(a)
Reynolds Ltd
Prot and Loss Appropriation Account for the year ended 30 September 2010
Net profit
Add Retained profits b/f from last year
Less Appropriations:
General reserve
Dividends payable:
Ordinary shares (150,000 3 6p) Paid
(150,000 3 14p) Proposed
Preference shares (7% 3 50,000) Proposed
Retained profits carried to next year
70,000
30,000
100,000
8,000
9,000
21,000
3,500
41,500
58,500
(b)
Reynolds Ltd
Balance Sheet as at 30 September 2010 (Extract)
Financed by:
Called-up share capital
Preference shares
Ordinary shares
50,000
150,000
200,000
53,000
58,500
111,500
311,500
Accounting
Revenue Reserves
General Reserve (45,000 1 8,000)
Note: The Authorised Share Capital is 200,000 1 ordinary shares and 50,000 - 7% preference shares.
85
27.3
Chang Ltd
Sales
Opening stock
Add Purchases
316,810
25,689
201,698
Less Closing stock
227,387
29,142
Gross profit
Less Expenses
Rent (4,300 2 300)
Lighting expenses
Bad debts
Provision for doubtful debts (938 2 861)
General expenses
Deprecation: Machinery (55,000 3 10%)
198,245
118,565
54,788
4,000
1,549
748
77
32,168
5,500
98,830
Net profit
Add Retained profits b/f from last year
19,735
34,280
Less Proposed dividend

Retained profits c/f to next year
54,015
10,000
44,015
Accounting
Fixed Assets
Premises
Machinery
Less Aggregated depreciation (15,800 1 5,500)
Current Assets
Stock
Debtors
65,000
55,000
21,300
33,700
98,700
29,142
21,784
938
Prepayments
Bank
20,846
300
23,101
73,389
Less Creditors falling due wihtin one year

Dividend payable
Creditors
Expenses owing
Net current assets
10,000
17,493
581
28,074
45,315
144,015
Financed by:
Capital and reserves
Called -up share capital
Revenue reserves
100,000
44,015
144,015
86
27.4X
(a)
Wayland Limited
Appreciation Account for the year ended 31 December 2010
'000's
Net profit
Add Profit and Loss Balance 1st January 2010
Less Appropriations
Transfer to general reserve
Preference dividend (6% 3 250,000)
Ordinary dividend 2 (Interim Dividend)
2 (8% 3 750,000)
Retained profits carried forward
25
15
20
60
'000's
250
195
445
120
325
(b)
Wayland Limited
Cost
Motor vehicles
Current Assets
Stock
Debtors
Bank
Current Liabilities
Creditors
Value added tax
Dvidends Payable:
Preference shares
Ordinary shares
Working capital
'000's
Net Book
Value
'000's
1,500
50
10
1,500
40
85
15
70
1,635
25
1,610
165
103
107
375
Accounting
Fixed Assets
Land and buildings
Fixtures and fittings
Aggregate
Depreciation
'000's
135
25
15
60
235
140
1,750
Creditors: amounts falling due after one year 5%

debentures
250
1,500
Capital and Reserves

Called up capital
Ordinary shares
6% Preference shares
Capital reserves
Share premium
Revenue Reserves
General reserve
Profit and loss account shareholders' funds
750
250
1,000
100
75
325
400
1,500
87
Answers
Chapter 28: Analysis and interpretation
of nancial statements
N Ltd
28.1 (a) M Ltd

(i) Current ratio
200,000
________
4:1
50,000
130,000
________
2:1
65,000
(ii) Acid test ratio

200,000 2 100,000
___________________
2:1
50,000
130,000 2 64,000
__________________
1:1
65,000
(iii) Stockturn
288,000
______________________
2.6 times
120,000 1 100,000 4 2
187,500
____________________
3.0 times
60,000 1 64,000 4 2
(iv) Debtors : Sales ratio

60,000
________
12 months 2 months
360,000
62,500
________
12 months 3 months
250,000
(v) Creditors : Purchases ratio

50,000
________
12 months 2.2 months
268,000
65,000
________
12 months 4 months
191,500
(vi) Gross profit %

72,000
________
100% 20%
Accounting
360,000
62,500
________
100% 25%
250,000
(vii) Net profit %

43,200
________
100% 12%
360,000
35,000
________
100% 14%
250,000
(viii) Rate of return on shareholders' sunds

43,200
________
100% 12.3 %
350,000
35,000
________
100% 13.7%
255,000
(b) Briefly N Ltd gives a better return to shareholders because of (viii) above.
Reasons include:
M Ltd's current ratio is higher. This indicates that M Ltd is in a better liquidity
position.
N Ltds stock turnover is higher than that of M Ltd. This shows that N Ltd manages
its sales performance more effectively.
The gross prot percentage of N Ltd is 5% higher than that of M Ltd. This is due to
better purchasing and selling prices. Net prot margins differ by a smaller margin
of 2% suggesting, that M Ltd has tighter control of its overhead expenses when
compared with its sales volume (8% compared with 11%)
88
(a)
Cruise Furnishings
Holmes Supplies
(i) Gross prot margin
600
_____
100 33 __1 %
600
_____
100 25%
(ii) Net prot margin
150
_____
100 8.33%
1,800
160
_____
100 6.67%
(iii) Current ratio
210
____
3.18 : 1
66
180
____
3:1
1,800
2,400
2,400
60
(b) Rate of stock tunover for Cruise Furnishings

1200
_____
10 Times a year
120
(c)
Profitability
Both businesses are making good net profits, Cruise 150,000 and Holmes
160,000. However, both the gross profit percentage and net profit percentage
for Cruise is better than Holmes, with the net profit percentage being 8.33% for
Cruise against Holmes 6.67%. This could be due to Cruise selling goods at a higher
price and their cost of sales being lower.
Liquidity
The current ratio for both Cruise and Holmes are very similiar with Cruise being
slightly higher at 3.18 : 1 against Holmes 3 : 1. If we calculate the acid test, i.e, we
remove stock from the calculation,
Cruise
210 2 111
__________
1.5 : 1
66
Holmes
180 2 120
__________
1:1
60
then Cruise is in a stronger position since it could raise 1.50 for every 1 owed
compared to Holmes who could raise 1 for every 1 of debt.
Conclusion
Accounting
28.2
Whilst Holmes has a greater turnover than Cruise the company is not as
profitable. In terms of liquidity again Cruise is in a stronger position which may in
part be due to Holmes long term liabilities of 2,070,000.
89
28.3X (a)
Year Ended
28.02.2009
29.02.2010
Net Profit Margin

Net profit
16,000
26,000
_________
35,000
____
100 45.71% ______
____
100 50%

____
100 ______
52,000
Sales
(b)
Mark up
21,600
35,500
____________
Gross Profit
____
100 _______
100 161.19% ________
100 215.15%
Cost of Sales
*13,400
*2,900 1 14,500 2 4,000 5 13,400
**16,500
**4,000 1 19.500 2 7,000 5 16,500
(c)
Rate of stock turnover
13,400
16,500
Cost of sales
_____________

________________
_________________

2,900 1 4,000 4 2
4,000 1 7,000 4 2
Average Stock
3.88 times 3 times
(d)
Accounting
Overall the profitability of the business is improving with the Net Profit % increasing
from 45.71% to 50%. Mark-up has also increased considerably from 161.19% to 215.15%.
However, the stock is taking longer to sell/turnover a decrease from 3.88 to 3 times
a year. This is possibly due to the business stock in hand increasing from 2,900 at the
beginning of the first financial year to 7,000 at the end of February 2010?
90
Answers
Chapter 29: Computers and
accounting systems
29.1
To:
From:
Date:
Re:
Director of Finance
Administrative Assistant
June 2010
Proposed Integrated Computerised Accounting System
Points in favour of the new system:

Faster data input and automatic processing.
Greater accuracy especially via automatic processing.
Documentation such as invoices, credit notes, statements, remittance
advices produced automatically.
Up-to-date information on customers accounts, etc. is readily
available.
Provides management information.
The system may be linked to the internet to allow for transactions
such as ordering goods to be carried out electronically.
Provides access to the organisations bank account via the internet.
More efficient and makes better use of resources.
29.2
Accounting
Arguments against the new system

The cost of the installation plus ongoing costs of maintenance and
updating software.
Training costs of staff.
Staff resentment of new system.
System downtime may be disruptive.
Fraudulent access can seriously affect business operation and
profitability.
Security measures that are necessary.
Health and safety issues associated with using computers.
Measures a medium-sized company may adopt to safeguard the security of its
financial data and records would include:
All companys financial information should be regarded as confidential
except where legislation states otherwise. Staff should be made aware of this
requirement in the companys code of conduct.
Staff should be allocated passwords to monitor accessibility to specific areas
of work.
Passwords need to be changed frequently.
Installation of anti-virus computer packages to prevent the threat of fraud.
Ensure data is saved and backed up regularly.
Store back-up data in an off-site location if deemed necessary.
29.3X Refer to text, Sections 29.3 and 29.4.
91
29.4X (a) Benefits to a small business when it has the use of internet facilities would
include:
access to web sites to obtain further information in many areas including
competitors, product ranges, location of customers/suppliers etc
transactions such as ordering, purchasing, selling, making payments to
customers and staff, receiving monies etc., can all be carried out online
the use of email for correspondence is quick, efficient and cost effective.

(b) A web designer would bring many benefits to a business as follows:

development of initial user-friendly web site
maintain an up-to-date web site
develop online facilities for business to offer online ordering and purchasing
from suppliers and sales to customers
promote a range of company products/services over a wider area which
could lead to increased sales and ultimately greater profits
advertising and marketing benefits to a larger consumer market.
(c) The disadvantages of offering a web site service:

keeping the web site up-to-date
the cost of maintaining the web site
ensuring that the web site is user friendly with appropriate easy to navigate
links.
29.5X Benefits of investing in a computerised accounting system would include:

quick and easy to install
capital outlays reasonable since packages are now much cheaper
less time to carry out book-keeping/accounting transactions
easier/less onerous work
more financial information available for management
greater accuracy
can process documents, e.g. invoices, credit notes, statements, payslips etc
Accounting
Adverse effects:
cost and disruption on installation
training
reluctance to change by staff
security issues
health risks
problems if the system goes down.
29.6 Other business uses for a computerised accounting system would be:
Payroll
Book-keeping
Budgeting
Preparation of financial statements
Cash management.
92

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Chapter 1: Introduction to accounting principles

Good financial control is important to ensure the continued profitability and

(a) Trading and Profit and Loss Account

(a) Going concern concept when a business is assumed to continue for a

(Any one from the above would be acceptable as an answer)

Employees would be interested in their employers financial results for the

Pearson Education Ltd 2010

(d) Ofce Machinery

2.4X Account to be debited

Pearson Education Ltd 2010

Office Furniture Account

Pearson Education Ltd 2010

(c) Motor Car

3.2X Account to be debited

Purchase Returns Account

Pearson Education Ltd 2010

Harper Motors Ltd

Ash Car Sales

3.4X Mark & Co

Motor Van Account

Ash Car Sales

Naik Bros Account

Curtis & Co Account

Pearson Education Ltd 2010

Pearson Education Ltd 2010

Trial Balance as at 31 May 2010

Pearson Education Ltd 2010

Delta Books Account

Pearson Education Ltd 2010

Pearson Education Ltd 2010

Pearson Education Ltd 2010

Trial Balance as at 30 April 2010

(e) T Khan (creditor)

(h) D Allen (debtor)

(i) Bank loan

Trial Balance of P Brown as at 31 May 2010

Trial Balance of S Higton as at 30 June 2010

Pearson Education Ltd 2010

Trial Balance of Ms Anita Hall as at 31 December 2010

(b) Error of commission

(c) Error of omission

(d) Error of original entry

(e) Complete reversal of entries

(f) Error of principle

4.8X (a) Error of principle

Pearson Education Ltd 2010

Date: 1 March 2011

20,000 coils sealing tape x 4.70 per 1,000

40,000 sheets A5 paper x 4.50 per 1,000

30,000 sheets A4 paper x 4.20 per 1,000

5.2X (a) & (b) & (c)

Pearson Education Ltd 2010

L Price & Partners

Therefore, output VAT is

Purchases Day Book

Sales Day Book

Purchases Day Book

(b) All business records must be kept for 6 years.

Pearson Education Ltd 2010

(a) Remittance advice a document which accompanies payments by cheque

(a) Purchase order

Statement of Account to John Ashley Ltd

The amount outstanding by John Ashley Ltd is 193.05

Edexcel IGCSE Accounting Student's Book Answers

Edexcel IGCSE Accounting Student's Book Answers

(b) It is important to distinguish between capital and revenue expenditure

If capital expenditure is incorrectly treated as revenue expenditure then